The go-ahead for the sixth disbursement of funds under the fully taxpayer-funded package of €110 billion shifts the spotlight to a second rescue of Greece that foresees 50 per cent losses for private investors in Greek bonds. The new aid plan, crafted at an October summit, also includes €130 billion in extra public funds.
After initially endorsing the next loan for Greece on October 21, the euro area froze the payment this month because former Socialist Premier, George Papandreou, announced a referendum on the second rescue plan. He later called off the vote, resigned and was succeeded by ex-central banker, Lucas Papademos, whose interim government has the support of three parties to press ahead with budget cuts needed for continued aid.
“We decided to release the sixth disbursement of the Greek programme now that prior actions have been met”, Luxembourg’s Jean-Claude Juncker told reporters yesterday in Brussels after chairing a meeting of the 17 euro area finance ministers, who also discussed growing threats to Spain and Italy from the debt crisis triggered by Greece two years ago.
Greece, which faces a fifth year of economic contraction in 2012, says it needs the next international aid payment by mid-December. The euro area’s instalment is part of a €8 billion disbursement, of which the International Monetary Fund will provide the remainder.
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