Greeks Given Breathing Space

The Greek parliament endorsed Greece’s fourth austerity package in the last three years when the budget was passed on Sunday. In principle, this cleared the ground for the approval of the next tranche of EU/IMF funding to be released when EU finance ministers met yesterday, however this has been delayed. Greece could run out of money by Friday of this week when it needs to find up to €5 billion to meet its obligations for payment of maturing bonds. Greece is going to the markets today in an attempt to raise €3.12 billion in emergency bridging loans to tide the nation over until the EU/IMF funds are released – which looks like a formality.

The two EU/IMF loans which Greece has already secured came with strings attached. Funding was to be released in tranches against a timetable and would only be disbursed if a so-called troika of EU, IMF and ECB officials reported that Greece was making sufficient progress on its objectives of putting its debts of a sustainable footing. This has required Greece to make painful cuts in people’s salaries and pensions (notably in the public sector), cut expenditure and reform tax and employment legislation. These measures, understandably, have been very unpopular with Greek citizens and nearly saw the election of a left-wing bloc which promised to tear up the bailout agreements.

In the aftermath of the spring’s two elections, the coalition has been arguing that Greece needs to be granted an extension of the timeframe for it to meet its obligations under the bailouts. At their meeting in Brussels yesterday, EU finance ministers have agreed to grant Greece a two-year extension to the timeline, following an endorsement of the extension by the troika. The granting of the extension is likely to cost a further €32.6 billion.