International Monetary Fund bails Greece

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International Monetary Fund bails Greece

The International Monetary Fund has agreed to approve Greece’s request for a payment of $4.6 billion made with the help of a loan supported by the European Union. This solution is meant to buy some time that will allow the European officials to come up with a second rescue plan.

Christine Lagarde, the Managing Director of the International Monetary Fund has declared that Greece’s willingness to comply with the measures imposed has delivered results. In the same time the IMF official said that “a durable fiscal adjustment is needed” to avoid a deficit “entrenched at an unsustainably high level” and, in the same time, “productivity-enhancing reforms should be accelerated” if the Greek government wants to ensure the recovery of growth.

This decision is made after, last week, the finance ministers of the euro-zone have unblocked €8.7 billion while they keep trying to find a solution for Greece’s poor economic situation. They want to include in their solution banks and insurers. The European Central Bank has criticized the desire of including the private sector in the plan, because its officials consider it may backfire.

The European Union was able to justify its decision to support Greece with a loan because of the budget cuts the Greek parliament decided to apply last week. The chances of actually applying these decisions in reality are begin reduced by a non-existent opposition support and by an increasing public hostility. In Lagarde’s opinion Greece’s plan to sell assets worth €50 billion until 2015, is vital and if accomplished will help the government reduce debts and accelerate growth.

Considering that Greece’s debt represent 142.8 percent of its total gross domestic product, investors are entitled to worry about Greece’s chances to deal with its debt. In fact, Greece’s situation has had an influence on other countries part of the euro-zone (Ireland and Portugal) that also had to seek help from the European Union.

The future announces even greater debts for the Greek people, because the European Union’s economists have estimated that by next year, Greece’s debt will represent 166.1 percent of its gross domestic product.

Greece it’s currently covered for the 4 billion euros in bills which need to be paid this month as well as for the coupon payments worth 3 billion euros. The next major challenge that Greece will have to face is represented by the 6.6 billion euros of bonds that the country will have to cover by August 20, this year.

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