By Simon Miller

Eurozone ministers have signed off the second tranche of bailout money to Greece but at the cost of further erosion of economic sovereignty.

After 14 hours of talks which ended early Tuesday morning, the so-called eurogroup agreed to give €130bn (£109bn) of money to Greece as it aims to reduce its deficit from 160% of GDP to 120.5% by 2020 in a series of stringent austerity cuts that have already seen a series of protests in Athens.

In addition, Greece has agreed to Dutch demands for a permanent supervisory body of EU officials which will oversee Greek finances and set up an "escrow" account which will have three months debt interest payments in it at any time.

During the tense talks, private investors were asked to increase their haircut from 50% to 53%. The investors agreed to swap their bonds for longer maturities and lower interest rates starting at 2% and rising to 4.3%.

The deal will also see the European Central Bank forego profits of up to €12bn on Greek bonds which will be pumped back into eurozone central banks.

Greek prime minister Lucas Papademos commented: “It's no exaggeration to say that today is a historic day for the Greek economy."

Despite the agreement, it is not clear whether Greece will be able to clear its debt problems.

A report from the troika of the International Monetary Fund, the European Central Bank and the European Commission warned that in a worst case scenario, Greek debt could hit 160% of GDP in 2020, needing an extra €240bn in bailout aid.

The report said: “The Greek authorities may not be able to deliver structural reforms and policy adjustments at the pace envisioned in the baseline."

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