Press Release: IMF Reaches Staff-level Agreement with Greece on €30 Billion Stand-By Arrangement

IMF News, May 2, 2010

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Canonical URL: Press Release: IMF Reaches Staff-level Agreement with Greece on €30 Billion Stand-By Arrangement

IMF staff mission, in consultation with representatives from the European Commission and the European Central Bank, reached agreement with the Greek authorities to support the government’s multi-year program with a three-year SDR 26 billion (about €30 billion; or US$40 billion) Stand-By Arrangement.
Euro Area members have pledged a total of €80 billion (about US$105 billion) in bilateral loans.
Joint commitment will bring total financing to €110 billion (about US$145 billion).
The Fund activated fast-track procedures and expected the arrangement to go to the Executive Board for approval within the week.

A combination of spending cuts and revenue increases amounting to 11 percent of GDP—on top of measures already taken earlier this year—are designed to:
- achieve a turnaround in the public debt-to-GDP ratio beginning in 2013; and
- reduce the fiscal deficit to below 3 percent of GDP by 2014.
Measures for 2010 involve a reduction of public sector wages and pension outlays.
Wages and pensions together constitute some 75 percent of total (non-interest) public spending in Greece.
There will be a significant reduction in military expenditures during the program period.

Pro-growth measures aim to modernize the economy and boost competitiveness to restore growth and jobs.
Steps include:
- strengthening income and labor market policies;
- better managing and investing in state enterprises;
- improving the business environment.
Reforms to fight waste and corruption include eliminating non-transparent procurement practices.

A Financial Stability Fund—fully financed under the program—will ensure a sound level of bank equity.
The authorities are taking decisive steps to strengthen and safeguard the financial system.

The authorities’ program is designed with fairness in mind:
- introduction of a more progressive tax scale for all sources of income;
- a clampdown on tax evasion and a step up in prosecution of the worst offenders;
- stronger enforcement and audit of high-wealth individuals.
Protection for the most vulnerable:
- reductions in wages and pensions are designed largely to exempt those living on the minimum;
- social expenditures will be revised to strengthen the safety net for the most vulnerable people.

The Fund judged the strong measures by the Greek government and significant spillover risks to merit an exceptional level of access to IMF resources—equivalent to 3200 percent of Greece’s quota in the Fund.
- This represents the largest access granted to a member country and indicates the Fund’s high level of support for the program and for Greece.
Greece’s IMF quota currently amounts to SDR 823 million.
Greece became a member of the IMF on December 27, 1945.

The Managing Director stated confidence that:
- the government’s firm commitment to implement the program will get the economy back on track and restore market confidence;
- while the initial implementation period will be difficult, the economy will emerge more dynamic and robust and able to deliver growth, jobs and prosperity.
The collective effort is intended to contribute to the stability of the euro, benefit all of Europe, and help promote global financial stability and a secure recovery in the global economy.

Press Release No. 10/176, May 2, 2010. Statement by Mr. Dominique Strauss-Kahn, Managing Director, International Monetary Fund.