Greece likely to win 8bn euro bailout in November
Greece is likely to win the next tranche of bailout fund worth 8 billion euro in November, once the Eurogroup and the International Monetary Fund's executive board approved the fifth review conclusions completed today.
Of total, euro area member states will contribute 5.8 billion and the IMF 2.2 billion.
Staff teams from the European Commission (EC), European Central Bank (ECB), and IMF have concluded their fifth review mission to Greece to discuss recent economic developments. The mission has reached staff-level agreement with the authorities on the economic and financial policies needed to bring the government’s economic program back on track.
Amid reports that Greece's debt haircut could be steeper than 50 per cent, the conclusions noted that the recession will be deeper than was anticipated in June and a recovery is now expected only from 2013 onwards. There is no evidence yet of improvement in investor sentiment and the related increase in investments, in part because the reform momentum has not gained the critical mass necessary to begin transforming the investment climate. However, exports are rebounding—albeit from a low base—and a shift towards a more dynamic export sector, supported by a moderation of unit labor costs, should lead to more balanced and sustainable growth over the medium term. Inflation has come down over the last year and is expected to remain below the euro area average in the period ahead.
In the fiscal area, Greece will not achieve the fiscal target for 2011, partly because of a further drop in GDP, but also because of slippages in the implementation of some of the agreed measures.
The mission believes that the additional measures announced by the government, in combination with a determined implementation of the adjusted Medium-Term Fiscal Strategy, should be sufficient to bring the fiscal programme back on track in 2012 and ensure that the deficit target of 14.9 billion euro will be met.
"Looking to 2013-14, additional measures are likely to be needed to meet programme targets. Such measures should be adopted in the context of an update of the Medium-Term Fiscal Strategy by mid-2012. To ensure that the program is growth-friendly, and in view of the ambitious assumptions regarding improvement in revenue administration already embedded in the Medium-Term Fiscal Strategy, it is essential that such measures focus on the expenditure side."
