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Eurozone economy shrinks

Greece has also hammered out a plan to write down €100 billion euros worth of Greek government bonds and swap existing debt for securities with lower interest rates, a deal that would result in losses of up to 70% for the private sector.

Despite progress on those fronts, a final decision on the second bailout is reportedly being held up by disagreements over Greece's debt reduction targets.

Under terms reached in October, Greece agreed to lower its debt load to 120% of gross domestic product by 2020 from about 160% currently.

But the nation's worsening recession has raised worries that Greece will not achieve those targets without additional support from official creditors such as the ECB.

Greece has struggled to meet the conditions of its May 2010 bailout and many eurozone governments have been calling for greater control over how any additional funds would be used, as well as increased oversight of the nation's budget policies.

In particular, officials have suggested that bailout funds would be placed in an escrow account and used to pay off debt before Greece paid other obligations.

Europe's debt crisis originated in Greece nearly three years ago and the situation there has yet to be fully resolved.

Source URL: http://money.cnn.com/data/world_markets/europe/?iid=EL

Europe stock rally faces a perilous road

The concern is that if Greece defaults it will be forced to leave the euro currency union, a development that could have severe and unknowable consequences for the global economy.

But fears of a full-blown debt contagion in the eurozone have eased this year amid aggressive moves by the ECB, which has flooded the banking system with cheap, low-cost loans.

Still, many economists say the long-term outlook for Greece is highly uncertain.

The nation's economy has been mired in recession for years and the austerity measures it is required to impose will further drag on growth.