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IMF releases aid to Greece after long delay

18 january 2013, 18:24
0
IMF Director Christine Lagarde. ©AFP
IMF Director Christine Lagarde. ©AFP
After lengthy delays, the International Monetary Fund unblocked part of its aid to Greece Wednesday, offering a brief respite to the recession-mired country grappling with austerity measures, AFP reports.

The amount released -- 3.2 billion euros ($4.3 billion) -- might seem a mere footnote to the 172 billion euro international bailout for Greece last March, the second rescue effort after a 2010 aid program foundered.

But the installment carries symbolic weight: it closes a chapter on the Greek debt crisis which had put the IMF and its European partners at odds and fueled doubts within the Washington-based institution about the merits of austerity in Europe.

"Following a political crisis that delayed implementation of the economic program, understandings were reached with the government on a fully recalibrated economic program to be supported under the EFF arrangement," the IMF said Wednesday.

"Greece's fiscal effort has been impressive by any measure," IMF managing director Christine Lagarde said in a statement.

The deep deficit slashing the country has been forced to undertake from the beginning of the program will help get Athens back to the spending levels prior to the crisis, she said, "and has been designed to protect the most vulnerable."

But, she warned, "much more remains to be done to achieve the critical mass of reforms needed to boost productivity and lower prices."

"Looking ahead, Greece needs to radically overhaul its tax administration to bolster tax collections, fight tax evasion, and shrink the public sector, in particular through targeted redundancies."

The IMF executive board approved release of the funds after completing the first and second reviews of Greece's economic performance under the program, which saw the board waiving some performance criteria and modifying others.

The European Union had acted more swiftly than the IMF, releasing 34.3 billion euros in mid-December that had been frozen. The eurozone is expected to approve a another 9.2 billion euro installment in the coming days.

The fresh IMF payment is part of a four-year, 28 billion euro Extended Fund Facility loan that gives a country exceptional access to IMF resources above what it normally would be able to borrow.

The IMF released an initial 1.6 billion euros but froze subsequent payments in view of Athens's failure to meet the loan program's criteria and concerns that the debt burden was unsustainable.

In November, after intense negotiations with European authorities, the IMF abandoned its 2020 goal for reducing Greece's debt burden to 120 percent of gross domestic product, and accepted a compromise of a 124 percent debt-to-GDP ratio.

Greece's debt currently stands at about 170 percent of economic output.

Greece must continue to restructure and strengthen the banking system, Lagarde said, noting that additional financing from eurozone member states to allow Greece to redeem treasury bills from banks could support liquidity and credit creation.

Lagarde underscored the eurozone's commitment to work with the Greek authorities and the IMF to ensure the success of the program and provide adequate support to Greece during the program and beyond.

"This would facilitate a return to debt sustainability and timely repayments to the fund," she said.

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