World Economy

Europe to Give Greece $11.5b

Europe to Give Greece $11.5bEurope to Give Greece $11.5b

Greece’s creditors reached an agreement that will allow the release of €10.3 billion ($11.5 billion) of aid and committed to ease the nation’s €321 billion of debt.

At a meeting of eurozone finance ministers in Brussels Tuesday, the International Monetary Fund stood down from its hard-line stance after delaying the payout, having insisted that Greece’s program didn’t offer a path to fiscal sustainability, Bloomberg reported.

“We on the part of the IMF have made a major concession—and I might as well be open about that—we had argued that these debt-relief measures should be approved up front and we have agreed that they will be approved at the end of the program,” said IMF Director of European Department Poul Thomsen, who added that the fund intends to participate in the program subject to the board’s approval. “We all showed flexibility.”

After an 11-hour meeting, the ministers agreed to release the much-delayed aid and set a path toward debt relief after the Washington-based IMF yielded its stance and allowed an accord to be reached. Some eurozone nations including Germany and the Netherlands, which have elections next year, had resisted the restructuring measures as they are restrained by domestic electorates that have grown weary of helping the Greeks.

  Political Capital Stretched

The aid disbursal will include a €7.5 billion portion that will be released in June to cover debt-servicing needs and to clear initial arrears, according to a statement. The remainder of the payout will be made after the summer.

Dutch Finance Minister Jeroen Dijsselbloem, who chaired the meeting, said he couldn’t have imagined this agreement taking place just a month ago. “The ministers have stretched their political capital to put this on the table.”

With Greek Prime Minister Alexis Tsipras accommodating demands for extra austerity and Europe keen not to fuel euroskepticism in the UK before its referendum next month on European Union membership, the finance ministers lined up behind a package that avoids a repeat of last summer’s drama in which Greece was pushed to the brink of a euro exit.

The eurozone agreed to benchmark its debt analysis on Greece’s ability to cover its costs and as a baseline scenario wants gross financing needs to remain below 15% of gross domestic product in the medium term and below 20% after that, according to the statement. The Eurogroup also seeks a medium-term primary budget surplus of 3.5% of GDP, a level the IMF had previously said Greece wouldn’t be able to sustain.

The accord is an “important moment” for Greece and may pave the way for the nation to end its cycle of recession and austerity, Greek Finance Minister Euclid Tsakalotos said.

“This agreement underlines the considerable efforts and the confidence we can have in the Greek government today,” French Finance Minister Michel Sapin said after the meeting.