Daily Management Review

Greece Survives in Eurozone, Pays Debt to ECB but Faces National Elections Very Soon


Greece Survives in Eurozone, Pays Debt to ECB but Faces National Elections Very Soon
Greece managed to scrape past being left out of the eurozone after it managed to repay
$3.7 billion or 3.4 billion euro to the European Central Bank after the debt strapped country received a $14.5 billion aid from the European Stability Mechanism, the Eurozone’s bailout fund on Thursday.

Thursday was the last day for Greece to pay out the debt to the ECB or face the likelihood of being thrown out of the eurozone and the euro. Greece had last week managed to convince the international creditors to agree to a bailout package and later passed the package at the country’s parliament despite negative voting my many member of the parliament belonging to the ruling party.

Despite opposition from Germany, Greece greatest aid granter in the previous two bailout packages, the European Stability Mechanism, the Eurozone’s bailout fund had agreed to disburse 86 billion Euros or $96 billion to Greece as assistance in various phases over a period of three years. The $14.5 billion aid that was given to Greece on Thursday was the first payment from this assistance package.

“The board also decided to immediately disburse 13 billion euros ($14.5 billion) to Greece. Today’s disbursement is the first part of a sub-tranche of €16 billion, to be used for budget financing and debt servicing needs,” a statement from the ESM said on Thursday while announcing the release of the funds.

“The remaining 3 billion euros ($3.3 billion) of this sub-tranche will be disbursed at the latest by the end of November, once Greece has completed additional prior actions,” the statement said.

The amount of 10 billion euros or $11 billion designated for recapitalization of Greek banks would be held in a segregated account in the form of ESM notes.

The imposition of capital control in June in Greece had resulted in the fast deterioration of Greek banks.

“The second sub-tranche of 10 billion euros will contribute to stabilizing the banking sector,” Klaus Regling , the Managing Director of ESM said in the statement.

However the bailout agreement has come with a series of strict austerity measures that are to be implemented by the Greek government. The measures include implementation of tax rises and spending cuts in return for funds. The Greek government under the Prime Ministership of Alexis Tsipras, would also require to overhaul the non-performing loans, and establish a fund to manage the proceeds from the privatization of state assets.
Though the austerity measures were adopted by the Greek parliament last week, the agreement has resulted in a deep divide within the ruling leftist Syriza party. At least 62 ruling party members of parliament had voted against the bailout package during the voting in Greek parliament last week.
Tsipras is reported by planning fresh federal elections and reports from Athens suggests that the probable date for the fresh elections would be in September. It is also reported the Prime Minister Alexis Tsipras is due to put in his resignation and call for fresh elections as early as this week.

There have been reports that Tsipras has plans to subdue the revolt within the party and run for fresh elections to gain a workable majority in the Greek parliament. The present government is reported to be a minority government with more than two thirds of the ruling party members voting against the government in last week’s voting for the bailout package.
(Source: www.ibtimes.com & www.bbc.co.uk)