7/21/2017 0 Comments IMF Board is set to Bailout GreeceThe International Monetary Fund’s recent activities have led to the approval of the latest Greek bailout. The news keeps pressure on Europe to further deliver debt relief and will prevent Greece from raising capital in markets for the time being. Greece’s IMF bailout sets a debt ceiling for the central government around €325 billion, accounting for the country’s current debt and the bailout funds it receives from its European creditors. “The IMF board has approved Greece’s bailout, in part as a reaction to current levels of debt, unemployment, and GDP which have been deemed unsustainable by the global community” said Keith Knutsson of Integrale Advisors. According to an earlier version of the document prepared in April, the ceiling of €325 billion was initially imposed on the general government debt, giving Greece a buffer of around €10 billion. The following provisions will force Greece to focus on implementing reforms agreed under the bailout such as amending the pension system and privatizing public industries. The European Central Bank, International Monetary Fund, the administration of Athens have not been to reach a viable solution for years. However, the beginning of the country’s third bailout program should provide the necessary relief for Greece moving forward. The involved parties reached a compromise last month when the Europeans agreed to a limited aspect of debt relief that will be implemented after the bailout ends. The IMF agreed to support a new program “in principle,” but would only distribute financing once Greece takes the necessary steps to fixing the structural issues in their economy. Despite the lack of a clear and feasible solution, the result of recent bailout negotiations created a sense of positive momentum for the Greek economy. The country’s borrowing costs have dropped, Moody’s rating agency upgraded the economic outlook, and the European Commission suggested that the EU should no longer enforce disciplinary measures. Despite the challenges faced, the Greek government is planning to enter the bond markets in the coming days with an issuance that will be mainly covered through swaps of a bond program that expires in 2019.
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October 2018
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