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Greece to get the latest tranche of bailout funds

in International Business

Greece to get the latest tranche of bailout funds

After weeks of tough talks, Eurozone finance ministers have agreed to approve the third tranche of bailout funds, 37bn Euros, to save the debt-ridden country.

The country will get 34.3bn Euros “ in the following days”, with the rest to follow early next year.

At the last meeting of Greece’s bailout lenders, it was agreed to grant the country a two-year delay in the speed of spending cuts, in order to take some of the pressure off Greece’s heavily-depressed economy.

However, the extension inevitably meant the Greek government would be overspending for longer and would therefore run up bigger debts than previously anticipated.

This prompted an objection from the International Monetary Fund (IMF), which made clear that it could not lend money to a government whose debts it considered ultimately unlikely to be paid back.

The IMF’s litmus test, laid down as a condition of Greece’s latest bailout, is that the government’s debts should fall to 124% of the country’s annual economic output by 2020.

The buyback of Greek debt was intended to lower the country’s debt load and make this possible. But it was dependent on the take-up from private investors.

On Wednesday, the country’s debt management agency said the government had bought back 31.9bn euros of bonds at 33.8% of their face value. The discount was not as large as had been hoped, but the difference was not enough to scupper the disbursement of the bailout funds.

So far, the European Central Bank, IMF and the European Commission have pledged a total of 240bn euros in rescue loans, of which Greece has received about 150bn euros.

In return, Greece has had to impose several rounds of tough austerity measures, which have contributed to a severe and prolonged economic contraction.

According to projections from the European Union’s statistics agency Eurostat, by the end of this year the Greek economy will have shrunk by a fifth since the financial crisis began in 2008.

Tags assigned to this article:
Greece bailoutGreece economyIMF

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