Greece Bailout Green Light From Eurozone but Not IMF

Euro - Image credits Mick Carvalho

This Friday the Eurogroup agreed to the third Greece rescue package of € 86 billion ($ 95.5 billion). The 3-year bailout first tranche of € 26 billion ($ 28.9) will be used to repay debt and recapitalize the banking system. According to the Greek Finance Minister Euclid Tsakalotosthe, a depositors money bail-in is out of the question.

The Eurogroup president, Jeroen Dijsselbloem said at the press conference that “the Eurogroup have come to a positive conclusion” and that “All the intense work over the last week has paid off.”

In the same press conference Jeroen Dijsselbloem mentioned the IMF by saying:

We welcome the intention of the IMF board to consider further financial support to Greece. They will do so in the autumn. We stressed that such IMF involvement for the Eurogroup is indispensable, and we welcome the positive assessment of the IMF staff of the policy conditionality contained in the MOU (Memorandum of Understanding).
For the IMF board to consider further financial support there are two crucial issues, we realize and accept that. First, there needs to be a full specification of fiscal structural and financial system reforms and secondly that debt sustainability is ensured.

Jeroen Dijsselbloem

The Greek depositors’ money is safe

Some EU Finance Ministers made it clear that deposits are safe, discarding any panic depositors may have had regarding losing their savings. Leaving the Eurogroup Meeting, the Greek Finance Minister Euclid Tsakalotos confirmed that no deposit bail-in would take place.

“This deal is something that we hope will take Greece forward. It takes Greece forward in the sense that the financial system should be much more stable from now on. There is the promise of the recapitalization of the banks without any deposit having any bail-in or anything to worry about. The process of reversing the negative effects of capital controls will start very quickly and will speedily return the banks to where they were before and hopefully on a far firmer footing.”

Euclid Tsakalotos (Greek Finance Minister)

The IMF still considers the Greek debt unsustainable

In an IMF statement issued Friday night by Christine Lagarde, the Greek’s public debt is “highly unsustainable” and the bailout should include measures to restructure the country’s debt. The “European partners should make commitments to relieve Greek debt, well beyond what has been done so far”.

Christine Lagarde added that only after a Greek debt relief will it be possible to implement a credible and comprehensive program for Greece. Only then will the IMF Board of Directors provide more financial assistance to help Greece.

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