WASHINGTON — The International Monetary Fund has put up nearly $40 billion to help bail out Greece and appease investors’ fears of a spreading European debt crisis.
The IMF’s executive board met in Washington Sunday to approve a three-year, C30 billion loan for the debt-plagued nation, part of a $140 billion package (C110 billion) negotiated with other eurozone countries.
With hundreds of billions in debts and a budget deficit of 13.6 per cent of gross domestic product, Greece was just weeks away from default when eurozone finance ministers agreed to activate a rescue. Greece has enacted tax hikes and deep cutbacks in government spending as a condition of the bailout.
The austerity measures have sparked riots and social unrest in the nation.
“The Greek government should be commended for committing to an historic course of action that will give this proud nation a chance of rising above its current troubles and securing a better future for the Greek people,” IMF Managing Director Dominique Strauss-Kahn said in a statement Sunday.
“Today’s strong action by the IMF to support Greece will contribute to the broad international effort under way to help bring stability to the euro area and secure recovery in the global economy,” Strauss-Kahn said.
Eurozone leaders on Saturday approved a $100 billion package of loans to help keep Greece from imploding. Greece will have access to about $7.1 billion (C5.5 billion) from the IMF on May 12, and will be able to tap a total of about $51.5 billion in combined IMF and EU funds this year.
Athens needed to see the first installment of loans before it is due to pay out about $11 billion (C8.5 billion) on 10-year bonds that come due on May 19. It had raised some cash on its own ahead of the looming bond payment, but not enough to cover the whole amount.
Together, the IMF and EU bailouts give Greece enough money to avoid having to raise private funds for two years, IMF officials said. By that time, Greece hopefully will be strong enough economically to borrow through private debt markets, IMF deputy managing director John Lipsky said in a call with reporters Sunday.
Earlier attempts to stabilize the Greek economy failed to reassure jittery investors, Lipsky said. He said Sunday’s action sends a signal that “the international community is willing to do whatever it takes to help Greece’s government overcome the severe challenges it’s facing.”