/ world today news/ The Eurogroup approved the financial aid plan for Greece, which will repay the new loan over 32.5 years.
“The third aid program for Greece of the European Stability Mechanism has a term of 3 years and a total value of 86 billion euros, of which 25 billion will be a “bank buffer”, the head of the Eurogroup, Jeroen Dijsselbloem, announced after the end of the meeting. who noted that Athens will repay the new loan for 32.5 years.
“The first tranche under the program will be in the amount of 26 billion euros, which Greece will receive in two sub-tranches. The first is in the amount of 10 billion euros, which will go to the recapitalization of the banks. The second tranche of 16 billion will be allocated in stages, with Athens receiving the first 13 billion of it by August 20,” Dijsselbloem said.
Even before the meeting of the Eurogroup, a source from the Greek Ministry of Finance noted that of the first 13 billion euros that Athens will receive, 12.5 billion will go to debt payments, and 0.5 billion to pay off overdue debts. To date, Greece’s external debt is worth 312 billion euros, which is more than 180% of the country’s GDP.
For the current year, the third package has a fixed primary budget deficit, not a surplus. “The reason for this is the uncertainty in the last 6 months, which had a strong negative impact on the economy of Greece,” noted European Commissioner Valdis Dombrovskis. “But the important thing is that we are closing this page, that confidence is being restored and that Greece will gradually return to the path of economic growth.”
“For the current year, we expect a reduction of the country’s GDP by 2.3%, a recession of 2.3%, against 2.5% growth. We have set these parameters in the third aid program, which is comprehensive and solid, the purpose of which is precisely easing uncertainty in the foreseeable future for Greece,” said Dombrovskis, who is the European Commission’s vice president for euro issues and social dialogue.
Dombrovskis also noted that the final approval of the third program for Greece by the European Stability Mechanism will take place by August 19. The stated end date is not accidental, as Athens has a payment to the European Central Bank on August 20. The third program must be approved individually and by the parliaments of each Eurozone member state.
At the press conference after the approval of the third package for Greece, Jeroen Dijsselbloem noted that the IMF will decide in October whether to participate in the program. A short time later, the Eurogroup issued a statement saying that the aid program was to be further specified at the request of the International Monetary Fund.
“The Eurogroup underlines that the terms of the financial assistance for Greece, on which an agreement was reached, need further clarification at the request of the IMF, especially as regards the pension reform, the development of a strategy in the financial sector and the actions of the Greek authorities,” the statement said.
Even later, German Finance Minister Wolfgang Schäuble named the conditions for the IMF’s participation in the third program for Greece.
“The director of the IMF, Christine Lagarde, participated in the meeting of the Eurogroup by means of a conference call. She stated that if the pension reform in Greece starts and if in October we reach a unified decision based on the data on the economic growth and solvency of the country, then it will offered the IMF the corresponding financial contribution,” Schäuble told a press conference.
“We fully welcome the intentions stated by Ms. Lagarde. The IMF’s strategy is clear. It has been so in all programs since 2010 – the Fund decides according to its own rules and its own bodies. All Eurozone countries count on the IMF to take part in the third financial aid program for Greece,” Schäuble also said.
Lagarde herself welcomed the approval of the third package for Athens, but once again called for the country’s debt to be restructured, i.e. partially written off, as it would be too much for Greece to repay.
“We approve the adoption of the third bailout program for Greece in exchange for reforms. The reform program adopted by the Greek authorities will restore the country’s budgetary and financial stability and allow it to return to the path of economic growth. However, we continue to opinion that the Greek debt needs substantial restructuring”.
“On this issue, we continue to have disagreements with our European partners, who rule out such a possibility. While in our opinion, Greece could not restore debt stability by its own actions alone. In order to do this, a substantial restructuring of the debt is necessary,” stated Washington Lagarde.
Lagarde called for writing off the Greek debt, or at least part of it, at the end of July. “Paying off the debt is practically impossible for Greece. Our experts at the IMF have calculated that with the payment of the interest on it, the debt could reach 200% of the gross domestic product of the country”.
However, the head of the Eurogroup, Jeroen Dijsselbloem, said that the write-off of the Greek debt is out of the question. “Nominal reduction of Greece’s debt is out of the question. Debt sustainability can be achieved without such cuts,” Dijsselbloem said at the press conference in Brussels following the approval of the third package.
Dijsselbloem assured that funds in Greek banks will not suffer as a result of their recapitalization, which will be carried out in the autumn after stress tests. The head of the Eurogroup also announced that the Special Fund, which will work on the privatization of Greek state assets, will appear by the end of 2015.
Brussels / Belgium
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