Second Economic Adjustment Programme for Greece
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The Second Economic Adjustment Programme for Greece, usually referred to as the second bailout package or the second memorandum, is a
It was signed on 1 March 2012 by the Greek Government under then-prime minister Lucas Papademos on one hand, and on the other hand by the European Commission on behalf of the Eurogroup, the European Central Bank (ECB) and the International Monetary Fund (IMF).
The second bailout package expired on 30 June 2015.[1] It was superseded by the Third Economic Adjustment Programme for Greece.
History
Early draft (July 2011)
On 21 July 2011, 17 leaders of Euro countries, meeting at an EU summit, approved a preliminary draft of a second bailout package for Greece to address the limitations of the First Greek bailout package.[2] The second bailout package would take the form of an €110bn aid package provided by the newly created European Financial Stability Facility. The repayment period was extended from seven to 15 years and the interest rate was lowered to 3.5%.[3]
For the first time, this also included a Private Sector Involvement (called a PSI), meaning that the private financial sector accepted a "voluntary" haircut (finance). It was agreed that the net contribution of banks and insurance companies to support Greece would include an additional €37bn in 2014.[4] The planned purchase of Greek bonds from private creditors by the euro rescue fund at their face value will burden the private sector with at least another €12.6bn.[5]
It was also announced at the EU summit, a reconstruction plan for Greece in order to promote economic growth.[3] The European Commission established a "Task Force for Greece".[6]
- EU summit (26 October 2011)
![](http://upload.wikimedia.org/wikipedia/commons/thumb/9/95/Poznan_Prezydencja.jpg/220px-Poznan_Prezydencja.jpg)
On the night of 26 to 27 October at the EU summit, the politicians made two important decisions to reduce the risk of a possible
Furthermore, the Euro countries agreed on a plan to cut the debt of Greece from today's 160% to 120% of GDP by 2020. As part of that plan, it was proposed that all owners of Greek governmental bonds should "voluntarily" accept a 50% haircut of their bonds (resulting in a debt reduction worth €100bn), and moreover accept interest rates being reduced to only 3.5%. At the time of the summit, this was at first formally accepted by the government banks in Europe. The task to negotiate a final deal, also including the private creditors, was handed over to the Greek politicians.
In view of the uncertainty of the domestic political development in Greece, the first disbursement was suspended after Prime Minister
One of the German EFSF-leverage critics, Fabian Lindner, then likened the austerity pressure Greece was feeling to the attitude the US exercised over Germany in 1931. In that earlier circumstance, the collapse of an Austrian and then a German bank followed, leading to a worsening of the Great Depression, political change and ultimately war.[9]
Final agreement (February 2012)
The
On 21 February 2012, the
On 9 March 2012 the
The cash will be handed over after it is clear that private-sector bondholders do indeed join in the haircut, and after Greece gives evidence of the legal framework that it will put in place to implement dozens of "prior actions" - from sacking underproductive tax collectors to passing legislation to liberalise the country's closed professions, tightening rules against bribery and readying at least two large state-controlled companies for sale by June.
On 3 March 2012, The
When the swap is executed, the bond holders will receive a cash payment on 15% of their original holding, and become issued with new Greek bonds worth 31.5% of their old bonds (covered by 24 new securities). Combined this will result in a 53.5% haircut of the face value, so that the Greek debt pile overall will decrease from its current level at €350bn, to a more sustainable level around €250bn.[23]
On 20 March 2012, the Master Financial Assistance Facility Agreement (MFFA) between the EFSF, the Hellenic Republic, the Hellenic Financial Stability Fund (HSFS) and the Bank of Greece was ratified by the Hellenic Parliament.[24]
See also
- Greek government-debt crisis
- Greek crisis countermeasures
- Economic Adjustment Programme for Portugal
- Economic Adjustment Programme for Cyprus
- Economic Adjustment Programme for Ireland
- Third Economic Adjustment Programme for Greece
References
- ^ Helena Sheehan, Syriza Wave: Surging and Crashing with the Greek Left, NYU Press, p. 15.
- ^ Süddeutsche Zeitung, 21. Juli 2011: Zum Abschluss ein Lächeln
- ^ tagesschau.de, 22. Juli 2011: Wie Griechenland gerettet werden soll
- ^ Wirtschaftswoche, 22. Juli 2011 Euro-Sondergipfel: "Die Bankenbeteiligung ist ein einmaliger Sonderfall"
- ^ zdf.de, 22. Juli 2011: Das zweite Griechenland-Hilfspaket im Detail Archived January 13, 2012, at the Wayback Machine
- ^ "Erklärung des EU-Kommissionspräsidenten José Manuel Barroso zum Sondergipfel". Ec.europa.eu. 2010-07-29. Retrieved 2012-05-17.
- ^ Lindner, Fabian (26 October 2011). "Das Risiko des EFSF wird jetzt vervielfacht!". blog.zeit.de. Retrieved 11 November 2013.
- ^ "Zustimmung zum Rettungsschirm: Was der Bundestag Merkel erlaubt". Financial Times Deutschland. 2011-10-25. Retrieved 2011-10-28.
- ^ Lindner, Fabian (24 November 2011). "In today's debt crisis, Germany is the US of 1931". The Guardian. Retrieved 2012-07-24. The analysis was revisited in July 2012, when another commentator saw the situation as yet worse and Germany's pro-austerity stance as hardened, yet more damaging and bringing the risk of a bank-default-trigger, for example, yet closer.Delamaide, Darrell (July 24, 2012). "Euro crisis brings world to brink of depression". MarketWatch. Retrieved 2012-07-24. The Lindner November 2011 op-ed also ran in Der Zeit.
- ^ "Q&A: Greek debt crisis". BBC News. 9 February 2012. Retrieved 11 February 2012.
- ^ a b "Eurogroup statement" (PDF). Euro Group. 21 February 2012. Retrieved 21 February 2012.
- ^ Castle, Stephen (20 February 2012). "Europe Agrees on New Bailout to Help Greece Avoid Default". New York Times. Retrieved 1 March 2012.
- ^ "Greek Debt Default: Investors' and Risk Managers' Perspective Riskdata study Mar 28, 2012". Archived from the original on 2012-06-14.
- ^ Fontevecchia, Agustino (11 March 2012). "Greece Default". Forbes. Retrieved 9 March 2012.
- ^ "Greece Swap Insurance Default". Wall Street Journal. 11 March 2012. Retrieved 9 March 2012.
- ^ "Insight: How the Greek debt puzzle was solved". Reuters. 29 February 2012. Retrieved 29 February 2012.
- ^ a b c Pratley, Nils (21 February 2012). "Greece bailout: six key elements of the deal". Guardian. London. Retrieved 21 February 2012.
- ^ "Euro Summit Statement" (PDF). Brussels: Rat der Europäischen Union. 26 October 2011. Retrieved 28 October 2011.
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(help) - ^ "Das Rettungspaket kommt, die Zweifel bleiben". Sueddeutsche. 21 February 2012. Retrieved 21 February 2012.
- ^ "Greek race to unlock bail-out". Financial Times. 21 February 2012. Retrieved 21 February 2012.
- ^ "Bondholders agree to restructure Greek debt". The Sun News. 5 March 2012. Retrieved 6 March 2012.
- ^ "Hellenic Republic - Ministry of Finance - Press release (9 March)" (PDF). Ministry of Finance. 9 March 2012. Retrieved 9 March 2012.
- ^ "Greek debt swap support close to 95%". Financial Times. 8 March 2012. Retrieved 8 March 2012.
- ^ "Ratification of the Act of Legislative Content "Approval of the Draft Master Financial Assistance Facility Agreement". Hellenic Parliament. 22 March 2012. Retrieved 21 February 2015.
Literature
- ISBN 978-92-79-22849-0.)
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: CS1 maint: DOI inactive as of January 2024 (link) CS1 maint: location missing publisher (link
External links
- Financial assistance to Greece on the website of the European Commission
- Original document of the Memorandum of Understanding on the Second Economic Adjustment Programme for Greece (March 2012)