IMF Managing Director Christine Lagarde, talking to Greece's Prime Minister Lucas Papademos on Monday, admitted after the Greek bailout deal was unveiled that "it's not an easy (program), it's an ambitious one."
By NBC News, msnbc.com and news services
Updated at 5 a.m. ET: BRUSSELS -- After months of tough negotiating, Europe and the International Monetary Fund sealed a deal early Tuesday to hand Greece ?130 billion ($170 billion) in additional bailout loans to save it from a default that threatened the viability of the euro, undermining global economic confidence.
The early-hours agreement to avert default comes after negotiators persuaded private bondholders to take greater losses and Athens to commit to very severe austerity measures.
Ministers finalized measures to cut Greece's debt to 120.5 percent of gross domestic product by 2020, a fraction above the target, to secure its second rescue in less than two years and meet a bond repayment next month.
The eurozone and the IMF, which will be providing the money for the new bailout, hope the new program will eventually put Greece back into a position where it can survive without external support and secure its place in the euro currency union. Finance ministers from Greece and the other 16 euro countries meeting in Brussels wrangled until the early morning hours over how that could be achieved.
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On top of the new rescue loans, Athens will also ask banks and other investment funds to forgive it some ?107 billion in debt, while the European Central Bank and other national central banks in the eurozone will forgo profits on their holdings.
The accord, which had been months in the making, seeks to reduce Greece's massive debts on all fronts, with both private and official creditors going beyond what they had said was possible in the past.
But the costs for Greece, in potential loss of autonomy and further strict austerity measures, were implicit from a statement from Eurogroup, which Europe's finance ministers belong to.
A Greek economist talks about a bailout's potential pitfalls before the final agreement is unveiled. NBC's Jim Maceda reports.
"The Eurogroup is fully aware of the significant efforts already made by the Greek citizens but also underlines that further major efforts by the Greek society are needed to return the economy to a sustainable growth path," the statement read. "We reiterate our commitment to provide adequate support to Greece during the life of the programme and beyond until it has regained market access, provided that Greece fully complies with the requirements and objectives of the adjustment programme."
So it was clear that Greece, which kicked off Europe's debt crisis two years ago, was at the very best starting a long and painful road to recovery. At the worst, the new program would push the country even deeper into recession and see it default on its debts further down the line.
"It's not an easy (program), it's an ambitious one," said Christine Lagarde, the head of the IMF, adding that there were significant risks that Greece's economy could not grow as much as its international creditors were hoping.
The austerity measures wrought from Greece are also widely unpopular among the population and may hold difficulties for a country which is due to hold an election in April. Further protests could test politicians' commitment to cuts to wages, pensions and jobs.
So social upheaval was a real risk, Paschos Mandravelis, a political analyst at Greece's Kathimerini newspaper, told NBC News' Andy Eckardt.
"If people in the broad middle class landscape get desperate and feel choked, there is the possibility of some kind of uprising," he said.
"We don't have money...Now our only target is to have food to survive," Greek shopkeeper Michael Ipermahos says about the gravity of the financial crisis. "My advice to my children is to leave Greece, throw away their Greek passports and be a citizen of another country."
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And some economists say there are still questions over whether Greece can pay off even a reduced debt burden.
A return to economic growth could take as much as a decade, a prospect that brought thousands of Greeks onto the streets to protest against austerity measures Sunday. The cuts will deepen its five-year recession, hurting government revenues.
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A report prepared by experts from the European Union, European Central Bank and International Monetary Fund said Greece would need extra relief to cut its debts near to the official debt target given the worsening state of its economy.
If Athens did not follow through on economic reforms and savings to make its economy more competitive, its debt could hit 160 percent by 2020, said the report, obtained by Reuters.
"Given the risks, the Greek program may thus remain accident-prone, with questions about sustainability hanging over it," the nine-page confidential report said.
NBC News, msnbc.com, Reuters and The Associated Press contributed to this report?
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