Europe Approves Extra Fund for Greece
Euro partners of Greece finally approved another package of bailout loans to Greece, after a 12 hour meeting on November 26, 2012. The bailout loan will prevent Greece from going bankrupt.
Finance ministers from the 17 European Union countries and officials of the European Central Bank (ECB) and the International Monetary Fund (IMF) started a meeting in Brussels to take a final decision on this regard. Finally, they approved a debt-relief of €40 billion, and another bailout loan of €44 billion to Greece. The aid will be spent for funding Greek banks and paying salaries to state employees.
Antonis Samaras, the Prime Minister of Greece welcomed the decision by European Union. “Tomorrow, a new day starts for all Greeks,†the thrilled Prime Minister told the reporters at early morning after the meeting. Euro partners of Greece are also happy with this decision. Jean-Claude Juncker, the president of Euro-group said, “This is not just about money… It is the promise of a better future for the Greek people and for the euro area as a whole.â€
In the meeting, finance ministers of Euro-zone countries approved some other measures to help Greece overcome their current financial crisis. They have agreed to reduce the interest rates on loans to Greece. Moreover, Greece will be allowed to buy back its own bonds from private investors. Profits from ECB purchases of Greek government bonds worth around €11 billion (about $14 billion) will be returned to Greece as well. Above all these, Greece can also apply for some extra measures in order to lower the country’s debt level below 110 percent of GDP in 2022.
However, when it comes to admitting that Greece may need another debt-relief or haircut in future, nothing has been stated very clearly in the meeting. This may be a strategy to please some northern European countries including Germany that are against providing such measures. German ministers will require approving the bailout package on the parliament. While they are quite confident about getting an approval from parliament this time, a lot of German ministers are not very sure that Greece will be able to pay off their debts fully.
In an interview with German public TV, Frank-Walter Steinmeier, the leader of the opposition in the German parliament, said “This is another lie by our government ….We need to be honest and tell German taxpayers that they will lose money on Greece.â€
Mr. Constantine Michalos, the president of the Athens Chamber of Commerce and Industry, said, “Don’t get me wrong, it is a very important sign of confidence in Greece, with positive repercussions on both the practical and the symbolic level.†However, Michalos, believes that the government of Greece should ensure structural reforms to be able to make the most of this new opportunity. Michalos says, “It’s hard enough…….but we have very little time.â€
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Lynette Zang
Chief Market Analyst, ITM Trading