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Eurogroup rescheduled the Greek debt with 6 years

29 November 2010 / 11:11:58  GRReporter
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The Financial Ministers of the Eurozone countries agreed late last night to reschedule the Greek debt with 6 years. The International Monetary Fund is expected to take the same decision too. The two institutions together with the European Central Bank prepared in May a rescue plan of 110 billion euros for the Greek economy to be paid to the troubled Balkan country within 3 years. According to the agreement signed with the Greek government Athens had to start paying back the debt two years after its expiration. But the more recent widespread concerns that Greece is unlikely to be able to settle the payments to creditors and at the same time bear the burden of the new payments, this time to its creditors from the Eurozone and the IMF, made the Financial Ministers preventively reschedule the debt for 6 years.

The decision was expected long ago. As GRReporter wrote in September "rescheduling of payments on Greek debt is inevitable, but it will be initiated by creditors of the country; it will be friendly and will not shock the market, on the contrary - it will reassure investors." This is the forecast that Stephen Major from HSBC Bank made at a banking forum in Athens. He called the rescheduling "voluntary" because it will be like a kind of award to the European Union and the International Monetary Fund creditors efforts to reform Greece. Steven Major said then that Greece will not go bankrupt in the short term, the EU support will continue after 2012, but the crisis will last at least 5-6 years.

Poul Thomsen, Deputy Director of IMF European Department, presented this possibility a week ago during the final press conference on the results of the Troika’s mission to Athens. He did not rule out the possibility of granting new loans to Greece, and also of extending the program for the Greek economy recovery.

The yesterday's decision of the finance ministers of the Eurozone countries allows Athens to start to pay back the 110 billion euros debt in 2021, not in 2015, as stipulated in the Agreement. It has to be clarified whether the debt payment rescheduling applies to the total amount of 110 billion euros or to only those tranches that Greece is to receive hereafter. Greece has received 29 billion euros so far and is to get another 9 billion in January 2011. The question that remained unanswered is whether these total 38 billion euros should begin to be paid in 2015 or in 2021.

In any case, last night's decision of the Financial Ministers of the Eurozone is very good news for Greece, which is on the verge of significant economic reforms. However, the decision will be final if the Financial Ministers of the European Union that will meet on December 7 approve it.

Tags: Greek debtReschedulingEurogroupFinancial MinistersIMF
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