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Eurogroup Agrees To Provide Aid To Greece

Eurogroup Agrees To Provide Aid To Greece
12/13/2012 8:08 AM ET

Eurozone finance ministers, collectively known as the Eurogroup, finally approved the release of a second disbursement of bailout funds to Greece on the completion of the government's debt buyback operation.

At its meeting in Brussels on Thursday, Eurogroup authorized the bailout fund, the European Financial Stability Facility (EFSF), to release the next installment for a total amount of EUR 49.1 billion. The disbursement will be made in several tranches.

Greece will receive EUR 34.3 billion in the following days. The remaining amount will be disbursed in the first quarter of 2013.

Of this, EUR 16 billion is expected be used for bank recapitalization, EUR 7 billion in cash for budget financing and around EUR 11 billion to finance the debt buyback.

Greece and other euro area member states are prepared to take additional measures, if necessary, the Eurogroup said in a statement.

The Eurogroup welcomed the debt buyback operation of Greece, saying that it will lead to a substantial reduction of the Greek debt-to-GDP ratio.

Buyback together with initiatives agreed by the Eurogroup on November 27 and full implementation of the adjustment programme is expected to bring public debt of Greece back to a sustainable path, to 124 percent of GDP in 2020. The ratio is expected to fall substantially below 110 percent by 2022.

Greece's debt management agency said the government had bought back EUR 31.9 billion of bonds at 33.8 percent of their face value.

Earlier this month, the rating agency Standard and Poor's downgraded credit rating on Greece to 'selective default' after the announcement of debt buyback plan.

Eurogroup President Jean-Claude Juncker said the Greek programme is back on a sound track.

The International Monetary Fund chief Christine Lagarde welcomed the Eurogroup's decision to support the debt buy back operation for Greece and its assurances to provide additional debt relief if necessary. She expects the IMF's Executive Board meeting to take place in January.

Eurozone finance ministers also discussed the bailout of Cyprus. Ministers welcomed the progress made by Cypriot authorities. A plan could be reckoned once they receive a report on the capital requirement of Cypriot banks, which is likely to be completed in mid-January.

In a move towards strengthening a banking union, finance ministers from the EU27 finalized an agreement earlier today, giving the European Central Bank more powers to oversee the functioning of banks in the crisis-hit region. The decision came ahead of the two-day EU summit in Brussels starting today.

EU plans to make the supervisory system fully operational by March 2014 or 12 months after the entry into force of the legislation, whichever is later.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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