Bail-out and reform: Context and next steps for Greece

17-07-2015

On 30 June 2015, Greece defaulted on an IMF loan. Due to lack of agreement between the Greek Government and the Eurogroup, the financial assistance programme from the European Financial Stability Facility expired on the same day. After tense negotiations during extraordinary summit meetings and the looming danger of Greece leaving the euro area, a preliminary agreement was finally reached on 13 July 2015. The heads of state or government of the euro area held an extraordinary Euro Summit meeting on the financial situation in Greece. The agreement adopted unanimously provides a roadmap for further discussions and a potential third bail-out programme (ESM loan) for Greece of up to €86 billion for a period of three years. The envisaged new three-year assistance programme (July 2015 − July 2018) requires several conditions to be fulfilled by the Greek authorities. These include the transfer of 'valuable' Greek assets to an independent fund. This fund will monetise these assets (target: €50 billion) in order to help to recapitalise Greek banks (€25 billion), to reduce the debt to GDP ratio (€12.5 billion) and to be disbursed for investment (€12.5 billion). On 15 July 2015, the Greek Parliament adopted the first set of reform measures required. In addition, the consent of national parliaments in several euro area Member States has been, or is being, sought in order to pave the way for the third bail-out programme for Greece. The European Commission has proposed a bridging loan of €7 billion (using funds from the EFSM) to Greece, enabling it to repay its immediate obligations to the ECB and the IMF by 20 July.

On 30 June 2015, Greece defaulted on an IMF loan. Due to lack of agreement between the Greek Government and the Eurogroup, the financial assistance programme from the European Financial Stability Facility expired on the same day. After tense negotiations during extraordinary summit meetings and the looming danger of Greece leaving the euro area, a preliminary agreement was finally reached on 13 July 2015. The heads of state or government of the euro area held an extraordinary Euro Summit meeting on the financial situation in Greece. The agreement adopted unanimously provides a roadmap for further discussions and a potential third bail-out programme (ESM loan) for Greece of up to €86 billion for a period of three years. The envisaged new three-year assistance programme (July 2015 − July 2018) requires several conditions to be fulfilled by the Greek authorities. These include the transfer of 'valuable' Greek assets to an independent fund. This fund will monetise these assets (target: €50 billion) in order to help to recapitalise Greek banks (€25 billion), to reduce the debt to GDP ratio (€12.5 billion) and to be disbursed for investment (€12.5 billion). On 15 July 2015, the Greek Parliament adopted the first set of reform measures required. In addition, the consent of national parliaments in several euro area Member States has been, or is being, sought in order to pave the way for the third bail-out programme for Greece. The European Commission has proposed a bridging loan of €7 billion (using funds from the EFSM) to Greece, enabling it to repay its immediate obligations to the ECB and the IMF by 20 July.