Second Economic Adjustment Programme for Greece

On 14 March 2012, euro area finance ministers approved financing of the Second Economic Adjustment Programme for Greece. The euro area Member States and the IMF committed the undisbursed amounts of the first programme (Greek Loan Facility) plus an additional €130 billion for the years 2012-14. Whereas the financing of the first programme was based on bilateral loans, it was agreed that - on the side of euro area Member States - the second programme would be financed by the European Financial Stability Facility (EFSF), which had been fully operational since August 2010.

In total, the second programme foresees financial assistance of €164.5 billion until the end of 2014. Of this amount, the euro area commitment amounts to €144.7 billion to be provided via the EFSF, while the IMF contributes €19.8 billion. (This is part of a four-year €28 billion arrangement under the Extended Fund Facility for Greece that the IMF approved in March 2012). Additionally, the high private sector involvement (PSI) in Greece's debt exchange offer made a significant contribution to improving Greece's debt sustainability. Out of a total of €205.6 billion in bonds eligible for the exchange offer, approximately €197 billion, or 95.7% have been exchanged.

The release of the disbursements is based on observance of quantitative performance criteria and a positive evaluation of progress made with respect to policy criteria, initially detailed in Council Decision 2011/734/EU of 12 July 2011 (as amended in November 2011, 13 March and 4 December 2012) and the Memorandum of Understanding setting the economic policy conditionality (with the last update signed on 7 December 2012).

Implementation

In spring 2012, continued political instability led to two elections rounds that created a very tense environment, where uncertainty about the possible election outcome led to an acceleration of capital outflows and doubts about the capacity of Greece to implement the adjustment programme. Ultimately, the 17 June election resulted in the formation of a coalition government comprised of three political parties with the mandate to secure Greece's future in the euro area, and hence to implement the economic adjustment programme resolutely. The new government and the administration quickly took up the challenge of identifying and taking the measures needed for catching up on the implementation of the programme. The difficulty to fulfil the conditionality in the immediate aftermath of the elections significantly delayed the disbursement of the next tranches of the loans from international lenders and, while justified, this has taken a heavy toll from the economy.

Against this background, and taking into account the action taken by the authorities, on 26-27 November 2012 the euro area Finance ministers and the IMF agreed to extend the fiscal adjustment path by two years, involving a reduction of the primary surplus target for 2014 from 4.5% of GDP to 1.5% of GDP and an even annual adjustment of 1.5% of GDP until a primary surplus of 4.5% of GDP is achieved in 2016. They also agreed on a package of measures aimed at reducing Greece's debt to 124% of GDP by 2020. The euro area Member States agreed to the following initiatives:

• A lowering by 100 bps of the interest rate charged to Greece on the loans provided in the context of the Greek Loan Facility.
• A lowering by 10 bps of the guarantee fee costs paid by Greece on the EFSF loans.
• An extension of the maturities of the bilateral and EFSF loans by 15 years and a deferral of interest payments of Greece on EFSF loans by 10 years.
• A commitment by Member States to pass on to Greece's segregated account, an amount equivalent to the income on the Securities Markets Programme (SMP) portfolio accruing to their national central bank as from budget year 2013.

In parallel, Greece informed that it was considering certain debt reduction measures (debt buy-back operation), through public debt tender purchases of the various categories of sovereign obligations.

On 12 December 2012, following the finalisation of the relevant national procedures and after having reviewed the outcome of the debt buy back operation conducted by Greece, the Eurogroup formally approved the second disbursement under the Second Economic Adjustment Programme for Greece. On that basis, Member States have authorised the EFSF to release the next instalment for a total amount of €49.1 billion. The disbursement would be made in several tranches. €34.3 billion was paid out to Greece in the following days. The remaining amount would be disbursed in the first quarter of 2013. First, a further amount of €7.2 billion has been made available to cover bank recapitalization and resolution costs. Second, funds to cover budgetary financing would be disbursed in three sub-tranches, linked to the implementation of specific Memorandum of Understanding milestones agreed by the Troika. The next tranches of €2.0 billion, €2.8 billion and €2.8 billion have been paid out on 31 January 2013, 28 February 2013 and 3 May 2013, following the endorsement by euro area Member States of the Commission's assessment of achievement of the January, February and March milestones respectively.

On 15 April 2013, staff teams from the European Commission, the ECB and the IMF concluded their mission to Greece in the context of the second review of the second adjustment programme. The mission has reached staff-level agreement with the authorities on the economic and financial policies needed to ensure the program remains on track to achieve its objectives. The Eurogroup and the IMF’s Executive Board are expected to consider approval of the review in May.

Overview of disbursements, EUR billion

Financing of the Second Programme for Greece on behalf of the euro are member States is provided by the EFSF. The EFSF issues bonds or other debt instruments on the capital markets and on-lends the funds raised to Greece (and other programme countries). It is backed by guarantee commitments from the euro area Member States and has a total lending capacity of €440 billion. (More information on the EFSF).

Disbursements under the second programme have taken places as follows:

* The first disbursement under the second programme took place in seven tranches from March to June 2012.
** The second disbursement amounts to €52.34 billion in total (EFSF and IMF) and is made in several tranches.
*** Amount made available since 28 January 2013 to cover bank recapitalization and resolution costs, not yet requested by the Greek authorities.

First Economic Adjustment Programme for Greece

On 2 May 2010, the Eurogroup agreed to provide bilateral loans pooled by the European Commission (so-called "Greek Loan Facility" – GLF) for a total amount of €80 billion to be disbursed over the period May 2010 through June 2013. (This amount was eventually reduced by €2.7 billion, because Slovakia decided not to participate in the Greek Loan Facility Agreement while Ireland and Portugal stepped down from the facility as they requested financial assistance themselves).

The financial assistance agreed by euro-area Member States was part of a joint package, with the IMF committing additional €30 billion under a stand-by arrangement (SBA).

>> see also: Economies of the EU Member States - Greece

Implementation

Under the Greek Loan Facility, the European Commission was not acting as a borrower but was entrusted by the euro-area Member States with the coordination and administration of the pooled bilateral loans, including their disbursement to Greece.

Overview of disbursements, EUR billion

Task Force for Greece

In July 2011, the Commission decided to set up the Task Force for Greece on the request of the Greek Government, and to appoint Horst Reichenbach as its Head. The main objectives of the Task Force are

• to identify and coordinate the technical assistance that Greece needs in order to meet the terms of the EU/IMF adjustment programme. This is done in close cooperation with Greece and benefitting from input from other Member States;
• to assist the relevant Greek authorities in defining the details of the kind of technical assistance to be provided; and to recommend legislative, regulatory, administrative and if necessary (re)programming measures for an accelerated take-up of EU funds, focussing on competitiveness, growth and employment.

To achieve these objectives it was decided to ensure an appropriate operational presence in Brussels and Athens by recruiting qualified and broadly experienced personnel able to cover a wide range of relevant policy areas. The Task Force set up by the Commission is an administrative structure, consisting of EU officials and some national experts, who are tasked with supporting the Greek authorities in implementing the necessary reforms and better absorbing different EU funds available. The role and mandate of the Task Force is to provide technical assistance in the areas where the Greek government has invited it to do so.

More information on the Task Force for Greece.

Programme reports

• The Second Economic Adjustment Programme for Greece – Second Review May 2013
• Presentation: The Second Economic Adjustment Programme for Greece – update on progress and challenges [224 KB]
• Report on Greece's Compliance with the Milestones for the disbursement of the March 2013 sub-tranche [76 KB]
• Report on Greece's Compliance with the Milestones for the disbursement of the February 2013 sub-tranche [73 KB]
• Report on Greece's Compliance with the Milestones for the disbursement of the January 2013 sub-tranche [75 KB]
• The Second Economic Adjustment Programme for Greece – First Review December 2012 
• The Second Economic Adjustment Programme for Greece - March 2012
• The Economic Adjustment Programme for Greece. Fifth review - autumn 2011
• The Economic Adjustment Programme for Greece. Fourth review - spring 2011
• The Economic Adjustment Programme for Greece. Third review - February 2011
• The Economic Adjustment Programme for Greece. Second review - autumn 2010
• The Economic Adjustment Programme for Greece. First review - summer 2010
• The Economic Adjustment Programme for Greece

Documents

News articles and press releases

13/05/2013	Eurogroup statement on Greece
15/04/2013	Statement by the European Commission, ECB and IMF on the conclusion of the review mission to Greece
14/03/2013	Statement by the European Commission, ECB and IMF on Greece
21/01/2013	Eurogroup statement on Greece
13/12/2012	Vice-President Rehn's remarks at the Eurogroup Press Conference
13/12/2012	Eurogroup Statement on Greece
04/12/2012	Greece granted two more years to correct its excessive deficit
27/11/2012	Eurogroup statement on Greece
27/11/2012	Statement by President Barroso on Greece
26/11/2012	Vice-President Rehn's remarks at the Eurogroup Press Conference
20/11/2012	Statement on Greece by the Eurogroup President, Jean-Claude Juncker
12/11/2012	Eurogroup Statement on Greece
17/10/2012	Statement of the Troika on the review of the Greek Programme
15/10/2012	One year of Task Force for Greece
05/08/2012	Greece: Statement by European Commission, ECB & IMF
02/08/2012	The European Commission welcomes Greek Government structural reform commitment
17/06/2012	Statement by Presidents Barroso and Van Rompuy on the result of the Greek elections
14/03/2012	Statement on Greece by the President of the Eurogroup, Jean-Claude Juncker
09/03/2012	Statement by Commission Vice-President Olli Rehn on private sector participation in the second Greek programme
08/03/2012	Eligibility of bonds issued or guaranteed by the Greek government in Eurosystem credit operations
06/03/2012	Letter from President Barroso to Prime Minister Papademos
01/03/2012	Statement on Greece by the President of the Eurogroup, Jean-Claude Juncker
29/02/2012	Nominate an EU Commissioner to help return Greece to growth, says Juncker to European Parliament
29/02/2012	Statement by President Barroso following his meeting with Mr Lucas Papademos, Greek Prime Minister
27/02/2012	Invitation from President Barroso to Prime Minister Papademos
21/02/2012	Statement on Greece by Vice-President Rehn at the Eurogroup
21/11/2011	Statement by President Barroso following his meeting with Lucas Papademos, Prime Minister of Greece. (SPEECH 11/778)
11/10/2011	Statement by the European Commission, the ECB and IMF on the Fifth Review Mission to Greece
13/09/2011	Questions and Answers on the Task Force for Greece
07/09/2011	Olli Rehn European Commissioner for Economic and Monetary Affairs Overcoming the Economic Crisis in Greece and Europe "Reset Greece" - ALDE Seminar Brussels
02/09/2011	Statement by the European Commission, the ECB and IMF on the Fifth Review Mission to Greece
27/07/2011	Information on IIF offer and debt-buy-back scheme
21/07/2011	Euro-area summit agreement on a new financial support programme for Greece
02/07/2011	Statement by the Eurogroup
02/07/2011	Greece - Commission publishes compliance report and recommends that disbursement should take place
03/06/2011	Statement by the EC, ECB and IMF on the Fourth Review Mission to Greece
24/02/2011	Statement by the EC, ECB and IMF on the Third Review Mission to Greece
23/11/2010	Statement by the EC, ECB, and IMF on the Second Review Mission to Greece
05/08/2010	Statement by the EC, ECB, and IMF on the first review mission to Greece
07/07/2010	The economic adjustment programme for Greece - Interim review
17/06/2010	EC, ECB and IMF Interim review mission to Greece, press statement
31/05/2010	The economic adjustment programme for Greece, Occasional Papers no 61
03/05/2010	Euro area and IMF agreement on financial support programme for Greece
11/04/2010	Eurogroup statement on the support to Greece
26/03/2010	Spring European Council statement on Greece