Greece gets 'stay of execution'

Managing Director, IMF - Photo: IMF
Managing Director, IMF - Photo: IMF

THE International Monetary Fund will rubberstamp a AU$28 billion contribution to the second Greek bailout next week, but that apparently makes Athenians feel no more optimistic over their future.

Greece's private creditors agreed to the biggest debt writedown in history on Friday, slicing more than 100 billion from the 368 billion that the country owed. The debt swap was a key condition of a $130 billion rescue package from the eurozone and the IMF, which should ensure that the country does not return to the drachma in the short-term.

The IMF board will confirm its contribution to the bailout in the next few days, but its managing director, Christine Lagarde, is pushing for nearly $30 billion to be handed over. This is towards the upper end of initial expectations, suggesting that Lagarde is not convinced by some economists' concerns that the bailout is doomed to fail.

As it was, Greece would have been unable to meet its debt repayment obligations in two weeks' time had the overwhelming majority of creditors not agreed to see 74 per cent wiped off the value of their bonds on Friday. That severe haircut meant that credit rating agencies still considered the debt swap a form of default on Greece's loans, triggering payment of more than $3 billion in default insurance contracts.

The mood on the ground in Athens is grim, as the Greeks take note of Ms Lagarde's warnings that the country must "undertake sustained and deep structural reforms over a prolonged period" on top of what they have already gone through.

People who were once economically secure now face the breadline as the public sector makes job cuts and overhauls pay.

Roxane McMeeken, a British journalist living in Athens, said: "There's an element of relief that things are on track, but everyone's aware that more austerity measures are in the pipeline. We've had a stay of execution, but no one's exactly celebrating."

Topics:  contagion greece greek crisis imf sovereign debt crisis

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