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Greece Gets First Blessing For Second Bailout-Loan of €130 Billion

Greeks’ sacrifices are finally redeemed 🙂 After cutting wages to a level enough to live in a hole, eat bread and tomato sauce and replace electricity with candle lights, the Eurogroup gave its provisional blessing for the second bailout, a package worth 130 billion euro. Loan, it is understood. Not a gift. Not a donation. A package that will bring more austerity and deeper recession…. The Eurogroup will give its final approval after March 9, 2012, when the PSI is expected to be concluded. The Eurogroup ministers also allegedly agreed that €23 to €40 billion of these €130-billion package will be used to recapitalize the banks. Anyone to recapitalize the Greek people?

 Greece has taken all the legal action needed to secure a second bailout from the euro zone countries, Eurogroup President Jean-Claude Juncker said on Thursday, opening the door to the first tranche to be paid out by March 20 if more conditions are met.

The money can be paid out only after the completion of a bond swap between Athens and private investors which is to be concluded by March 9 and which aims to halve Greece’s privately-held debt, cutting it by 100 billion euros (83.4 billion pounds).

“All required legislation by the parliament and the ministerial cabinet has been adopted and a few pending implementing acts should be completed shortly,” Juncker said in a statement after a meeting of euro zone finance ministers.

Athens has passed laws on fiscal consolidation, pension reform, financial sector regulation and structural reforms. It still has to issue some decrees and other ministry decisions that will translate the laws into action.

“This will allow the Greek adjustment effort to regain momentum, which – together with a rigorous implementation of the agreed policy package for the new programme – constitutes the basis for putting the public finances and the economy of Greece back on a sustainable path,” the statement said.

The second financing programme for Greece, which follows a 110 billion bailout agreed in May 2010, will total 130 billion euros, plus 34.4 billion euros of the undisbursed remainder of the first programme.

Included in the second programme is up to 30 billion euros of “sweeteners” designed to smooth the bond swap, in which private investors will forgive Athens 53.5 percent of the nominal value of their Greek bonds.

That process can now go ahead, with the euro zone’s EFSF bailout fund authorised by euro zone ministers to raise the funds to carry out the operation.

The ministers also agreed on a backstop facility for the recapitalisation of Greek banks. No figures were given but two euro officials said 23 billion out of the 130 billion euros was earmarked for that purpose. Another official said it could be as much as 40 billion.

The Eurogroup also agreed to raise money to pay accrued interest on Greek bonds, which officials said was 5.5 billion. (Full Article REUTERS)

PS I know some very nice Greek expressions to really comment on the second bailout, but my mom wouldn’t allow me to use them. At least, not in written form…

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One comment

  1. It would appear that Greece is getting a raw deal from all of this. Whilst the banks get cash there appears to be nothing so far for the Greek people.

    I read a fascinating analysis earlier which suggested that the ordinary Greek may now be worse off than when Greece joined the Euro. From the Mindful Money blog of the economist Shaun Richards.

    “I decided to look for some perspective as to how Greece now stands over the whole Euro period and found it in her latest Household Budget Survey. Back in 1993/94 average monthly household expenditure was 1554.14 Euros per month which rose to 1887.24 Euros in 1998/99. So before the Euro it was growing. However the latest number for 2009 showed a decline to 2065 Euros from 2008′s 2143. Are you thinking what I am thinking?

    It looks if we project Greece’s decline since then that average monthly household expenditure levels in Greece may have got near to Euro entry levels last year and may well drop below them this. Now the survey was not carried out every year in the past so I cannot be definite but it looks as though we have now entered a phase where Greeks are worse off than they were at the time of Euro entry on this measure. Not exactly what it said on the tin was it? (All the numbers are at 2009 prices).

    It is by no means conclusive proof but it cannot be rejected out of hand either. “