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November 23, 2010    

Greece set to receive third instalment of rescue loan

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by Kay Murchie
Greece set to receive third instalment of rescue loan

The International Monetary Fund (IMF) has today announced that Greece has met the conditions of its loan and will therefore receive the third instalment of its bailout loan.

In May, the EU and the IMF agreed to loan €110 billion. The three-year rescue deal comprises €80 billion from the EU, with the rest coming from the IMF.

However, the crisis-torn economy has been told it needs to take extra steps in order to receive its fourth instalment in February 2011.

Poul Thomsen, IMF’s mission chief, was asked if Greece’s third instalment was secure and he said: “Greece has definitely done what it was supposed to in order to get this tranche so I am sure it will get it, yes.”

However, Mr Thomsen added that Greece’s objectives for next year will be to rein in spending in state enterprises and in the health sector as well as improve tax collection.

For many months now, Greece has been making big cuts to public spending in an attempt to cut its deficit, which include reducing wages for state workers, trimming retirement benefits, and raising sales, fuel and alcohol taxes.

However last week, the European Union’s statistics office, Eurostat, said Greece’s budget deficit reached a revised 15.4% of annual economic output last year – higher than the 13.6% reported in April.

The revised figure, which is almost two percentage points more than originally forecast, now makes it the largest deficit in the euro zone.

As a result of the upward revision, Greece has said its deficit for this year will only be reduced to 9.4% and not the 7.8% it previously targeted.

In related news, last week, Greece’s Prime Minister George Papandreou, said it might be forced to ask for an extension to the time before it has to start repaying the funds.

In response, Mr Thomsen said: “We have options of allowing longer repayment periods or to give a follow up loan.”

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