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More money for Greece


When will the Greek crisis be over? Who knows? The IMF just agreed to lend 28 billion euros to Greece, approving yesterday a loan of 28 billion euros to Greece. This is a longer credit refundable to longer term, better adapted to the Greek situation.

The Board of Directors of the International Monetary Fund (IMF) agreed yesterday to a proposal from the Executive Director, Christine Lagarde, to consent to a loan of about 28 billion euros, 1.65 billion paid immediately. Of these 28 billion euros, 10 billion are from a first aid program to Athens in May 2010 which was not used and the other 18 billion are new money.

As a result, the IMF contribution to the second program for Greece (EUR 130 billion) is significantly reduced compared to the foreground of 110 billion euros. At the time, the Washington institution’s committed to provide about one-third of the agreed amount. Approximately 20 billion euros that the IMF has already lent must be repaid by Athens between 2013 and 2015. The decline in the Fund’s contribution under the new aid plan is explained perhaps by the reluctance of emerging countries to further support the rich countries of the Old Continent.

Emerging countries, particularly China, have seen a larger role and an increased weight in the decisions of the IMF since the appointment of Christine Lagarde. The new capital will be filled under the Extended Fund Facility (EFF) which agrees to funding plans for a maximum period of four years. Greece will therefore receive funding from the IMF until 2015, while loans from Europe are planned until 2014.

The repayment period of the IMF loans has also been extended to suit the Greek case, and is between four and a half and ten years. “We realized that this country needed time to complete its reforms,” recently ??confided a senior IMF official. The European Commission, meanwhile, announced yesterday in Brussels that it would soon present a growth strategy for Greece.

Horst Reichenbach, who heads the task force appointed by the Commission last July, presented in Athens the significant progress being made to help Greece modernize its public administration. Nine areas have been defined with the use of experts from all Member States. The changes are fast. Horst Reichenbach welcomed the harvest of 946 million euros in back taxes, double the expected amount and a 15% drop in the number of outstanding tax disputes in courts over the last four months.

Let’s hope that the worse is now behind us and that such a small stops to have such an extraordinarily large negative effect of global financial markets.

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