## Press Release: IMF Executive Board Approves €28 Billion Arrangement Under Extended Fund Facility for Greece _IMF News, March 15, 2012_ ## Source details **Canonical URL:** [Press Release: IMF Executive Board Approves €28 Billion Arrangement Under Extended Fund Facility for Greece](https://www.imf.org/en/news/articles/2015/09/14/01/49/pr1285) ## Other formats - [Markdown version](/en/news/articles/2015/09/14/01/49/pr1285/index.md) - [Structured JSON version](/en/news/articles/2015/09/14/01/49/pr1285/index.json) - [Bundle manifest](/en/news/articles/2015/09/14/01/49/pr1285/bundle-manifest.json) ## Bibliographic details - Published: March 15, 2012 --- ### Executive Board decision and financing - Approved a four-year SDR 23.8 billion (about €28 billion, or US$36.7 billion) arrangement under the Extended Fund Facility (EFF) for Greece. - Allows immediate disbursement of SDR 1.4 billion (about €1.65 billion, or US$2.2 billion). - The EFF arrangement entails exceptional access to IMF resources, amounting to 2,159 percent of Greece’s quota. - Took note of Greece’s cancellation of the three-year Stand-By Arrangement (SBA) approved in May 2010 (Press Release No. 10/187). - Official sector support for the second Greek program: - €130 billion (about US$170 billion) in new financing, plus the remainder of the financing support for the first program of €34 billion (about US$44 billion). - IMF contribution of €28 billion will be disbursed in equal tranches over a four-year period. - IMF contribution represents about three-elevenths of the total, excluding payments related to the private sector involvement (PSI) and repayments of bonds held by the European Central Bank. - This structure will keep the Fund’s peak-exposure broadly unchanged relative to the SBA. ### IMF Managing Director statement — program rationale and priorities - Greece has implemented wide-ranging painful measures during a deep recession; fiscal deficit reduced markedly and competitiveness has gradually improved. - Key remaining challenges: a large competitiveness gap, a high level of public debt, and an undercapitalized banking system. - Program focus: - Restoring competitiveness and growth. - Achieving fiscal sustainability. - Ensuring financial stability. - Preconditions and assurances for program success: - Successful debt exchange operation, debt relief and long-term support from European partners. - Commitment of major Greek political parties to program objectives and policies. - Policy priorities highlighted: - Competitiveness-enhancing structural reforms, with bold labor market measures, liberalization of professions and product markets, improved business environment, and privatization of state-owned assets. - Significant further fiscal adjustment to put debt on a sustainable downward trajectory. - Reaching a primary surplus of 4½ percent of GDP by 2014 will require politically difficult cuts in government spending and measures to address tax evasion. - Adjustment should be fair and sustainable, including strengthening the core social safety net and tax collection efforts. - Securing financial sector stability and depositor confidence through liquidity support for banks, funds for recapitalization, incentives to preserve private ownership, and strengthened resolution framework and governance of oversight agencies. - Risks: - Risks to the program remain exceptionally high; no room for slippages. - Full and timely implementation, broad-based public support, and support from European partners are critical. - Euro area leaders committed to provide adequate support provided Greece fully complies with program requirements and objectives. ### Annex — Recent economic developments - Since 2009 Greece has been unwinding fiscal and external imbalances through deep recession. - Real GDP declined by more than 13 percent since 2009. - Private investment led the downturn in 2009; public retrenchment started in 2010. By 2011, private consumption became the main driver of the recession. - Competitiveness gains not yet evident economy-wide; current account deficit remained close to 10 percent of GDP. - Productivity growth turned positive only at the end of 2011 as labor market adjustment gathered speed, but unemployment rose rapidly. - Slow adjustment despite deep recession reflects wage and price rigidities and a small tradables sector. - Fiscal deficit improved by about 6 ½ percentage points of GDP between 2009 and 2011 despite steep recession. - Primary deficit in 2011 was 2 ½ percent of GDP, below the long-run debt-stabilizing level of a 1 ½ percent of GDP primary surplus. - Recession and government debt exposure losses left banks undercapitalized, necessitating higher public support. ### Program summary (objectives and main measures) - Program aims: restore competitiveness and growth, attain fiscal sustainability, and secure financial stability. - Emphasis on structural reforms to accelerate economic growth and employment. - Strengthening competitiveness: - Make the labor market more dynamic to improve competitiveness, strengthen growth and reduce unemployment. - Reduce rigidities in product and service markets to increase competition and decrease prices. - Ambitious privatization and steep reductions in bureaucratic barriers to investment to restore investment and growth. - Improving the fiscal position: - Program provides room for structural reform impacts in 2012, targeting a primary deficit of 1 percent of GDP in 2012. - Bulk of fiscal adjustment to take place in 2013-14 to bring primary balance to the new target of 4½ percent of GDP. - Government will focus on improving tax collection; even with ambitious tax efforts some 5½ percent of GDP in additional spending cuts will be needed. - Cuts will focus on reducing the size of government and more efficiently targeting social transfers. - The core safety net will be strengthened to protect the most vulnerable. - Restoring financial sector stability: - Significant resources will be channeled to help banks cope with the recession and restructuring of government debt. - Government support structured to provide incentives to maintain private ownership where feasible. - Strengthened framework for bank resolution and recapitalization and for financial sector oversight to ensure effective stewardship and oversight. - Reducing debt levels: - A combination of private and official sector involvement is expected to deliver enough debt relief to place debt on a trajectory to fall below 120 percent of GDP by 2020 under the program baseline. ### Growth expectations and outlook - Growth in 2012 is expected to be in the range of -4½ to -5 percent, given fiscal adjustment and labor market reforms. - Recovery expected to begin quarter-over-quarter in 2013, with moderate cyclical developments in 2014-2016. ### Greece: Selected economic indicators (highlights) - Arrangement and IMF metrics: - SDR 23.8 billion (about €28 billion, or US$36.7 billion) EFF arrangement. - Immediate disbursement: SDR 1.4 billion (about €1.65 billion, or US$2.2 billion). - Exceptional access: 2,159 percent of quota. - IMF quota: SDR 1.1 billion (about €1.3 billion, or US$1.7 billion). - Key program targets and fiscal figures: - Target primary deficit for 2012: 1 percent of GDP. - Target primary surplus by 2014: 4½ percent of GDP. - Additional spending cuts needed: some 5½ percent of GDP. - Selected macro series (percentage changes or levels as shown): - Real GDP: 2010 -3.5; 2011 -6.9; 2012 -4.8; 2013 0.0; 2014 2.5; 2015 3.1; 2016 3.0; 2020 2.2. - Output gap (percent of pot. output): 2010 2.9; 2011 -2.4; 2012 -6.7; 2013 -4.7; 2014 -2.6; 2015 -0.9. - Total domestic demand: 2010 -6.0; 2011 -8.9; 2012 -1.4; 2013 1.3; 2014 1.9. - Private consumption: 2010 -3.6; 2011 -7.2; 2012 -5.7; 2013 -1.1; 2014 0.9; 2015 0.5; 2016 0.4; 2020 0.2. - Gross fixed capital formation: 2010 -14.5; 2011 -17.0; 2012 -6.6; 2013 5.8; 2014 8.5; 2015 8.0; 2016 5.0. - Exports of goods and services: 2010 4.2; 2011 3.2; 2012 5.5; 2013 7.0; 2014 7.5; 2015 6.9. - Imports of goods and services: 2010 -7.0; 2011 -5.1; 2012 2.4; 2013 2.3. - Unemployment rate (percent) (Based on Labor Force Survey): 2010 12.5; 2011 17.3; 2012 19.4; 2013 18.2; 2014 16.8; 2015 15.6; 2016 11.7. - Unit labor costs: 2010 -0.4; 2011 -2.8; 2012 -8.6; 2013 -1.6; 2014 -1.9; 2015 -0.7; 2016 1.7. - Consumer prices (HICP), end of period: 2010 5.1; 2011 0.8; 2012 0.6. - Consumer prices (HICP), period average: 2010 4.7; 2011 -0.5; 2012 2.0. - Current account (percent of GDP): 2010 -10.1; 2011 -9.8; 2012 -7.5; 2013 -5.4; 2014 -3.3. - Export of goods and services (percent of GDP): 2010 20.0; 2011 22.7; 2012 24.8; 2013 25.9; 2014 26.8; 2015 27.7; 2016 28.6; 2020 31.8. - Gross external debt: 2010 179; 2011 192; 2012 193; 2013 200; 2014 184; 2015 141; 2016 (blank); 2020 126. - Public finances (general government, percent of GDP): - Total revenues: 2010 39.5; 2011 41.0; 2012 42.2; 2013 42.1; 2014 40.1. - Total expenditures: 2010 50.1; 2011 50.3; 2012 49.5; 2013 46.8; 2014 44.2; 2015 41.7; 2016 42.0; 2020 41.3. - Primary expenditures: 2010 44.6; 2011 43.4; 2012 43.2; 2013 40.4; 2014 37.6; 2015 35.6; 2016 35.8. - Overall balance: 2010 -10.6; 2011 -9.3; 2012 -7.3; 2013 -4.6; 2014 -2.1; 2015 -1.2. - Primary balance: 2010 -5.0; 2011 -1.0; 2012 4.3. - Gross financing needs (pct of GDP): 2010 24; 2011 29; 2012 73; 2013 23; 2014 21; 2015 17; 2016 11; 2020 9. - Memo: GFN (in billions of Euro): 2010 54; 2011 63; 2012 149; 2013 47; 2014 43; 2015 36; 2016 25. - Memo: Deposit accumulation (in billions of Euro): …; 2011 7.4; 2012 -2.9. - Privatization receipts (percent of GDP): 2010 2.1; 2011 2.6. - Gross debt (in percent of GDP): 2010 145; 2011 165; 2012 163; 2013 167; 2014 161; 2015 153; 2016 117. *Press Release No. 12/85, March 15, 2012.* --- ## Content in this bundle - [Pr1285apdf (PDF)](/-/media/websites/imf/imported/external/arabic/np/sec/pr/2012/pr1285apdf.pdf){rel="external" type="application/pdf"} - [Pr1285cpdf (PDF)](/-/media/websites/imf/imported/external/chinese/np/sec/pr/2012/pr1285cpdf.pdf){rel="external" type="application/pdf"} - [Pr1285rpdf (PDF)](/-/media/websites/imf/imported/external/russian/np/sec/pr/2012/pr1285rpdf.pdf){rel="external" type="application/pdf"} --- ## References - [Greece and the IMF](http://www.imf.org/external/country/GRC/index.htm) - [Press Releases](https://www.imf.org/en/news/searchnews) - [PRESS CENTER](http://presscenter.imf.org/) - [Press Release No. 10/187](https://www.imf.org/external/np/sec/pr/2010/pr10187.htm) - [https://www.imf.org/en/home](https://www.imf.org/en/home) _Source: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr1285_