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15 March 2012

IMF Executive Board approves €28 billion arrangement under Extended Fund Facility for Greece


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The Executive Board of the International Monetary Fund today approved a four-year €28 billion arrangement under the Extended Fund Facility (EFF) for Greece, in support of the authorities' economic adjustment programme.


The Executive Board also took note of Greece’s cancellation of the three-year Stand-By Arrangement (SBA) for Greece which had been approved in May 2010. Official sector support for the second Greek programme entails €130 billion in new financing, in addition to the remainder of the financing support for the first programme of €34 billion. The IMF contribution of €28 billion will be disbursed in equal tranches over a four-year period. It represents about three-elevenths of the total, excluding payments related to the private sector involvement (PSI) and repayments of bonds held by the European Central Bank. This will keep the Fund’s peak exposure broadly unchanged relative to the SBA.

Following the Executive Board’s discussion, IMF Managing Director and Chair, Christine Lagarde, said in a statement: “Greece has made tremendous efforts to implement wide-ranging painful measures over the past two years, in the midst of a deep economic recession and a difficult social environment. The fiscal deficit has been reduced markedly and competitiveness has gradually improved. However, the challenges confronting Greece remain significant, with a large competitiveness gap, a high level of public debt, and an undercapitalised banking system.“

“The new Fund-supported programme will enable Greece to address these challenges while remaining in the eurozone. The programme focuses on restoring competitiveness and growth, fiscal sustainability, and financial stability. The authorities are fully committed to these ambitious objectives and stand ready to take any additional measures as may be necessary. The successful debt exchange operation, debt relief and long-term support from Greece’s European partners, and the commitment of the major Greek political parties to programme objectives and policies provide important assurances for the new programme.“

“Greece’s priority is to undertake competitiveness-enhancing structural reforms. The government’s bold labour market measures will play a crucial role in this regard, complemented by measures to liberalise professions and product markets, improve the business environment, and privatise state-owned assets.“

“Significant further fiscal adjustment is necessary to put debt on a sustainable downward trajectory. Reaching a primary surplus of 4½ per cent of GDP by 2014 will require politically difficult cuts in government spending, as well as decisive measures to address tax evasion. It is important that the adjustment be both fair and sustainable, through strengthening the core social safety net and tax collection efforts.“

“Securing financial sector stability and depositor confidence is also a priority. The programme secures liquidity support for Greek banks, and provides funds for their recapitalisation, alongside incentives to preserve private ownership. The resolution framework and the governance of oversight agencies have been strengthened to ensure appropriate use of public funds and safeguard against conflicts of interest.“

“Risks to the programme remain exceptionally high, and there is no room for slippages. Full and timely implementation of the planned adjustment—alongside broad-based public support and support from Greece’s European partners—will be critical to success. The euro area leaders have reiterated their commitment to provide adequate support to Greece during the life of the programme and beyond until it has regained market access, provided that Greece fully complies with the requirements and objectives of the adjustment programme.”

Press release



© International Monetary Fund


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