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Greek to be assessed on its debt reduction progress

in International Business

Greek to be assessed on its debt reduction progress

Creditors from the troika (made up of the International Monetary Fund (IMF), European Central Bank (ECB), and the European Commission (EC)) arrive on Greece on Tuesday to audit Greek progress on debt reduction.

The troika will then decide whether Greece is eligible the last tranche (31.5bn Euros) of the aid package agreed in March. The decision is unlikely to happen before September, according to  a European Commission spokesman.

Greece’s budget deficit stood at 9% of GDP in 2011. The country promised to reduce the deficit below 3% of GDP by the end of 2014.

Greece seems to have fallen behind in their plans and is expected to ask for more time to repay its loans.

Under the terms of its international loan agreement with the troika, Greece has vowed to reduce its total debt to 120% of GDP by 2020.

But, Prime Minister Antonis Samaras would have had to have raised another 12bn euros through higher taxes and the sale of public assets such as the country’s loss-making railways to have met this bailout target.

The IMF said it was going to support Greece to help it get “back on track”; however, reports over the weekend suggested that the IMF would refuse calls for further aid.

Greece economy is shrinking faster than most had forecast. The Bank of Greece expects GDP to shrink 5% this year in its deepest recession since the 1930s.

As a result, economists calculate that Greece may need a third rescue package worth up to 50bn Euros.

If Greece were to default on its outstanding loans that, in turn, could force it to exit the eurozone and return to the drachma.

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