ATHENS — The International Monetary Fund on Thursday approved C28 billion ($36.56 billion) in funding for crisis-hit Greece over the next four years, while Standard and Poor’s said that the country’s new bonds were still vulnerable to a default.
An IMF’s executive board granted the immediate release of C1.65 billion ($2.15 billion) of these funds as part of the country’s second bailout, a statement said.
Greece will receive a total C172.7 billion in rescue loans from its eurozone partners and the IMF to keep it afloat in the next few years, as dizzily high borrowing rates have blocked its ability to raise money on the international bond markets.
IMF Managing Director Christine Lagarde warned that risks to Greece’s austerity and reform program still “remain exceptionally high, and there is no room for slippages.” She said new pain lies ahead for Greeks, despite the tough measures implemented over the past two years.
“Full and timely implementation of the planned adjustment — alongside broad-based public support and support from Greece’s European partners — will be critical to success,” she said in a statement.
“Significant further fiscal adjustment is necessary to put debt on a sustainable downward trajectory,” Lagarde said, adding that politically difficult spending cuts lie ahead.
Without the bailout, Greece would have been forced into a messy default of a C14.5 billion bond repayment due on March. 20, a move that could have sent shockwaves throughout the global financial system and further destabilized the group of 17 countries that use the euro as their currency.
The new bailout cash was approved after Greece secured a massive debt-reduction deal with banks and other private bond holders, swapping old government bonds for new ones that have better repayment terms.
The ratings agency Standard and Poor’s assigned a CCC score — or still vulnerable to default — and said Greece’s sovereign rating would remain in selective default until the exchange was completed next month.
The country has survived since May 2010 on a first rescue loan package worth a total C110 billion ($143.63 billion). In return for both bailouts, Athens has imposed harsh cost-cutting measures, slashing pensions and salaries while repeatedly increasing taxes. The countries main political parties have promised to honour commitments after elections expected in late April or early May.
Also Thursday, Finance Minister Evangelos Venizelos said he would ensure the terms of the bailout deals would be met if he is part of the next government.
Venizelos is the only contender for the leadership of the majority socialist PASOK party in a vote this Sunday. Once he takes over the party helm, he will resign as minister to focus on the election campaign.
“It is hypocritical to say that you can sign commitments and then say you are not bound by them. That’s an insult to our intelligence,” Venizelos said.
PASOK has seen its popularity plunge and opinion polls indicate no party will win an outright majority in the election, amid public anger over austerity measures.
Meanwhile, a European Union inspector has reported rare progress in Greece’s effort to reform its large civil service — one of the key austerity measures and a condition of receiving the bailout.
Horst Reichenbach, heading an EU task force sent to Greece to assist painful structural reforms, said there had been a “number of very positive developments” including an improvement in clearing tax arrears.