The Eurozone finance ministers have agreed to grant Greece a further €15 billion loan which will help it to ensure that it does not default on its current repayments in respect of other support loans that it has had from the EU and IMF. As part of the debt relief package, Greece will be given longer to repay €96.9 billion of existing loans at modest (or no) interest. The current phase of Greek loans was due to come to term in August, originally.
The Greek Finance Minister Euclid Tsakalotos claimed that Greece was now turning a new page and the EU Economic Affairs Commissioner, Pierre Moscovici was even more Bullish, declaring that “the Greek crisis ends here” – we shall see.
The origins of the Greek financial crisis were laid down when the nation used some creative accounting techniques to enable it to met the convergence criteria for joining the Euro at its launch. When the full scale of the Greek public debt came to light during the Global Financial Crisis, the financial markets demanded ever higher interest payment on Greek public borrowing, ultimately shutting it out of the market and forcing Greece to ask the Eurozone and IMF for help. This was granted with the caveat that Greece make a wide range of economic and public spending reforms which proved very unpopular with Greek citizens, but hopefully will have put Greece back on the path of sustainable economic growth.
The austerity measures imposed on Greece led to high levels of unemployment and a dramatic decline in living standards for many Greeks, particularly those on pensions. Ultimately, it caused the two major parties to fall from power allowing Syriza, a coalition of left parties, to take power in the final phases of the crisis.
Currently, the Greek public debt stands at 180% of the nation’s GDP.
Commenting on the debt relief deal, Mr Tsakalotos said:
"I think Greece is turning a page. I think that it has all the building blocks there to leave the programme with confidence that we can access the markets, that we can implement our growth strategy and turn the agenda away from one of fiscal adjustment, which has been completed, to one of growth. So I think it is a historic moment as people have said, a momentous moment."
The IMF did not contribute to the third Greek bailout because of concerns over the sustainability of the Greek debt. Whilst they are confident that Greece will soon be able to raise money on the financial markets, they remain concerned over the magnitude of Greek debt and are known to favour a write-down of part of it, a move that Germany (amongst others) would find hard to convince their citizens over.