The International Monetary Fund approved a 28 billion-euro ($36.6 billion) loan for Greece as part of a second bailout with the euro area that requires more austerity and steps up controls over the country’s spending.
The Washington-based IMF said 1.65 billion euros will be immediately available under the new arrangement. The four-year loan announced today follows an earlier program that was cancelled, leaving 9.7 billion euros that was never disbursed.
Greece completed the world’s largest-ever sovereign-debt restructuring and had to agree to deeper spending cuts to obtain the new public funds. Global risks posed by the European crisis diminished after euro area members this week approved a second bailout for Greece.
While the conditions attached to the loan may prove hard to meet amid a fifth year of recession and upcoming elections, European officials are counting on the 130 billion-euro package to buy some time to insulate the rest of the region from the debt crisis, said Domenico Lombardi, a senior fellow at the Brookings Institution in Washington.
“The main function of this agreement is to contain the crisis for the next few months in order to provide a more stable environment for Italy and Spain to carry out their adjustments and therefore stabilize the euro area as a whole” said Lombardi, a former IMF board official.
The agreement, formally approved by euro countries yesterday, caps months of negotiations over a second package after an initial rescue in 2010 failed to halt the debt turmoil.
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