To support the Greek government’s efforts to get its economy back on track, euro area Member States agreed on 2 May 2010 to a 3-year programme (15), provid-
ing a total of €80 billion in bilateral loans (this amount was eventually reduced by €2.7 billion, because Slovakia decided not to participate in the Greek loan facil- ity agreement while Ireland and Portugal stepped down from the facility as they requested financial assistance themselves). Together with €30 billion from a standby agreement with the IMF, a loan package of €110 billion was formulated. Since 2010, the Commission, the ECB and the IMF, working as a troika, have as- sisted Greece to bring its economy towards sustainability. Greece has made major fiscal adjustments under exceptionally difficult circumstances. Together with the IMF, the euro area countries have now committed €237.3 billion of financing for Greece until 2014. Private-sector creditors are contributing another €106 billion through the debt exchange that reduced the nominal value of their investment by 53.5 %.
In the second programme (16), agreed in March, euro area Member States via the
EFSF and the IMF committed the undisbursed amounts of the first programme plus an additional €130 billion for the years 2012–14. During this period, and subject to conclusive reviews, the EFSF is authorised to commit an overall amount of €144.7 billion (including the already committed or disbursed amounts for private-sector involvement and bank recapitalisation), while the IMF will contrib- ute €28 billion over 4 years.
Klaus Regling, Managing Director of the European Financial Stability Facility, Christine Lagarde, Managing Director of the International Monetary Fund, Jean-Claude Juncker, President of the Eurogroup, and Olli Rehn, European Commission Vice-President responsible for Economic and Monetary Affairs and the Euro, at the Eurogroup meeting of 20 February.
G E N E R A l R E P O R T 2 0 1 2 — C H A P T E R 2
In mid-December, the Eurogroup formally approved the second disbursement under the second economic adjustment programme for Greece, following the fi- nalisation of the relevant national procedures and after having reviewed the outcome of the debt buy-back operation conducted by Greece, which will lead to a substantial reduction of the Greek debt-to-GDP ratio. The Eurogroup reaffirmed that this, together with the initiatives agreed by the Eurogroup on 27 November and full implementation of the adjustment programme, should bring Greece’s public debt back on a sustainable path, to 124 % of GDP in 2020. Greece and the other euro area Member States are prepared to take additional measures, if necessary, to ensure that this objective is met. It was on this basis that Member States authorised the EFSF to release the next instalment for a total amount of €49.1 billion, of which €34.3 billion was paid in December.
overview of disbursemenTs, billion €
First programme
Disbursement Euro area/EFSF IMF Total
may 2010 14.5 5.5 20.0 september 2010 6.5 2.6 9.1 december 2010–January 2011 6.5 2.5 9.0 march 2011 10.9 4.1 15.0 July 2011 8.7 3.2 11.9 december 2011 5.8 2.2 8.0
total disbursed under
first programme 52.9 20.1 73.0
Second programme
Disbursement EFSF IMF Total
march–June 2012 (*) 74 1.6 75.6 december 2012 (**) 34.3 34.3
total disbursed under
second programme 108.3 1.6 109.9
total 161.2 21.7 182.9
(*) The first disbursement under the second programme took place in seven tranches from March to June 2012.
(**) The second disbursement amounts to €52.34 billion in total (EFSF and IMF) and is made in several tranches.
Greece task force
The task force, put at the disposal of Greece to provide technical assistance in implementing its challenging reform agenda, including on tax, labour markets, healthcare, the judicial system, public administration, energy, transport and a range of other reforms, continued its work (17) in 2012 but the pace of reforms
was slower than anticipated due to the electoral situation in the country. With the formation of the new Greek government, renewed impetus was given to the process in the latter part of the year.
S T R E N G T H E N I N G E C O N O M I C G O V E R N A N C E A N D F I N A N C I A l S T A B I l I T Y I N T H E E U R O P E A N U N I O N 35
Ireland
The agreed external assistance for Ireland amounts to up to €67.5 billion over 3 years (where the EFSM will contribute €22.5 billion) as part of a total package worth €85 billion (including contributions from Ireland).
Overview Of disbursements, billiOn €
Disbursements EFSF EFSM IMF (*) Bilateral (**) Total
Quarter 1 2011 3.6 8.4 5.8 0.0 17.8 Quarter 2 2011 0.0 3.0 1.4 0.0 4.4 Quarter 3 2011 3.0 2.5 1.5 0.5 7.5 Quarter 4 2011 2.8 0.0 3.9 0.5 7.2 Quarter 1 2012 2.7 4.5 3.2 0.7 11.1 Quarter 2 2012 0.0 2.3 1.4 0.5 4.2 Quarter 3 2012 0.0 0.0 0.9 0.7 1.6 Quarter 4 2012 0.0 1.0 0.9 — 1.9 Total disbursed 2011–12 12.1 21.7 19 2.9 55.7 to be disbursed 5.6 0.8 3.5 1.9 11.8 Total commitment 17.7 22.5 22.5 4.8 67.5
(*) IMF amounts are based on €–SDR exchange rates and might therefore show differences. (**) Bilateral includes Denmark, Sweden and the United Kingdom.
Portugal
The agreed assistance for Portugal totals up to €78 billion over 3 years with an EFSM share of €26 billion.
Overview Of disbursements, billiOn €
Disbursements EFSF EFSM IMF (*) Total
may–sept. 2011 5.9 13.5 6.1 25.5 Quarter 4 2011 — 0.6 4.0 4.6 Quarter 1 2012 3.8 1.5 2.8 8.1 Quarter 2 2012 5.2 4.5 5.2 14.9 Quarter 3 2012 2.6 — 1.4 4.0 Quarter 4 2012 0.8 2.0 1.5 4.3 Total disbursed 2011–12 18.3 22.1 21.1 61.4 to be disbursed 7.7 3.9 4.9 16.5 Total commitment 26 26 26 78
(*) IMF amounts are based on €–SDR exchange rates and might therefore show differences.
G E N E R A l R E P O R T 2 0 1 2 — C h A P T E R 2
spain
Spain requested financial assistance for its financial sector on 25 June. The pol icy conditions specific to the financial sector contain measures to increase the long-term resilience of the banking sector, thus restoring its market access, and to deal effectively with the legacy stock of assets stemming from the bursting of the real estate bubble. The agreement was endorsed by the Eurogroup meeting in Brussels on 20 July, with the memorandum of understanding and the financial assistance facility agreement signed subsequently.
The terms and conditions of the financial sector assistance were negotiated be- tween the Spanish authorities and the European Commission, in liaison with the ECB and the European Banking Authority (EBA), with technical assistance from the IMF.
The 4 December Eurogroup meeting of euro area finance ministers welcomed a decision by the ESM to authorise the disbursement of up to €39.5 billion to Spain (18). The disbursement is the first tranche of the programme for the coun-
try’s financial sector. During their meeting, ministers reviewed progress on the bank recapitalisation programme in Spain, which was adopted in July to overhaul weak segments in the country’s banking sector. Funds from this disbursement will be used to reinforce the most severely affected financial institutions, as well as to capitalise a newly created asset management company which will acquire and manage banks’ underperforming assets. In a related development, the Commis- sion concluded that the restructuring plans of four Spanish banks are in line with EU state aid rules. The Commission’s approval clears the way for the banks to receive aid from the ESM.
Cyprus
In the face of troubles in the banking sector and macroeconomic imbalances, Cyprus requested financial assistance from the European Union and the IMF. Considerable progress has been made towards a possible macrofinancial assis- tance programme for Cyprus, which envisages a significant financial, fiscal and structural adjustment, as foreseen in a draft memorandum of understanding agreed at staff level on 23 November. The euro area finance ministers, meeting on 13 December, welcomed the fact that the Cypriot authorities were demon- strating their commitment to such reforms and that the Cypriot parliament had passed a first set of measures as agreed with the international institutions. The Eurogroup noted the interim results of the due diligence exercise on the capital needs of the Cypriot financial sector, whose main parameters were broadly in line with expectations underlying programme discussions. The final results were ex- pected early in 2013.
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