Eurozone Reaches Agreement For Greece Bailout Package

Eurozone officials have approved the release of a bailout package worth €10.3 billion to Greece after the International Monetary Fund (IMF) softened its stand on requiring immediate debt relief measures

Greece’s international creditors came to an agreement in a meeting held in Brussels to taking steps towards easing Greece’s enormous debt of €321 billion.

Poul Thomsen, director of the IMF’s European program said that the institution had made significant concessions to allow the greek bailout. Debt relief measures will now be required at the end of the program rather than at the beginning.

The fund’s stance had been in opposition to Germany’s which had maintained that debt relief measures could not be put in place until the ongoing bailout package worth €86 billion ends in mid-2018. Greece will now receive funds approved in two tranches, the first one worth €7.5 billion will be released in June while the second one of €2.8 billion will be given in September.

Several Eurozone finance ministers stated that Greece had taken enough fiscal measures to improve its situation over past months and thus deserved to receive the next bailout package.

In a statement, Michel Sapin, France’s finance minister, said

Greece needs room to breathe, it needs certainty. It has made considerable efforts, which again we have seen in adopting a difficult package of measures.

The measures taken by Greece include tax increases on items like tobacco, coffee, internet use as well as a higher VAT. It has approved pension reforms despite its unpopularity within the country. The government has also initiated plans to disinvest state assets in a bid to raise more revenue.

The debt relief measures given to Greece include a freeze on lower interest rates and easing out its repayment schedules. These measures are expected to make Greece’s debt of €321 billion which is almost 180 percent of its GDP more manageable. According to forecasts made by the IMF, Greece will now have to deal with a debt worth 250 percent of its GDP by 2050 without a significant amount of re-profiling on the terms of the loans the country owes.

While Eurozone officials feel that Greece’s current austerity measures could result in a budget surplus of 3.5 percent of GDP, the IMF’s director Christine Lagarde does not believe that this is feasible. The IMF believes that the surplus would not exceed 1.5 percent of the GDP.

However both agree that Greece needs to have a budget surplus exceeding 3.5 percent of its GDP by 2018 in order to improve its financial position.