ESM: Greece should continue reforms to become ‘success story’
The full statement from the European Stability Mechanism announcing Greece’s exit from the bailout program:
Greece officially concludes its three-year ESM financial assistance program today with a successful exit. This follows the disbursement of 61.9 billion euros by the ESM over three years in support of macroeconomic adjustment and bank recapitalisation in Greece. The remaining 24.1 billion euros available under the maximum 86 billion euro program volume was not needed.
ESM Members agreed the financial assistance package in August 2015. Greece had also received 141.8 billion euro in loans from the EFSF between 2012 and 2015. The total amount disbursed by both rescue funds is 203.77 billion euros, which is unprecedented in modern history, as is the long maturity of the loans (currently over 30 years on average) and very favourable interest rates. From 2010 to 2012, Greece received 52.9 billion euro in bilateral loans under the so-called Greek Loan Facility from euro area Member States.
“Today we can safely conclude the ESM program with no more follow-up rescue programs, as for the first time since early 2010 Greece can stand on its own feet. This was possible thanks to the extraordinary effort of the Greek people, the good cooperation with the current Greek government and the support of European partners through loans and debt relief”, said Mario Centeno, the Chairperson of the ESM Board of Governors. “The ultimate goal of the financial assistance plan and reforms in Greece over the past eight years has been to create a new basis for healthy and sustainable growth. It took much longer than expected but I believe we are there: Greece’s economy is growing again, there is a budget and trade surplus, and unemployment is falling steadily.”
ESM Managing Director Klaus Regling said: “Greece is the fifth country after Ireland, Spain, Portugal, and Cyprus to exit an EFSF or an ESM program. As the ESM and EFSF are Greece’s largest creditors, holding 55 euros of total Greek government debt, our interests are aligned with those of Greece. We want Greece to be another success story, to be prosperous and a country trusted by investors. This can happen, provided Greece builds upon the progress achieved by continuing the reforms launched under the ESM program. We will soon provide further support to Greece as the medium-term debt relief measures, politically agreed by the Eurogroup in June, will be incorporated into lending arrangements with Greece and are expected to be approved formally by the EFSF [European Financial Stability Facility] board of directors this fall.”
In the course of its financial assistance programs, Greece benefitted from unprecedented solidarity of its euro area partners. Thanks to the ESM’s and EFSF’s extremely advantageous loan conditions with long maturities and low interest rates, Greece saves around 12 billion euro in debt servicing annually, 6.7 percent of GDP every year. In 2017, the ESM implemented short-term debt relief measures that will reduce Greece’s debt-to-GDP by around 25 percentage points until 2060 and its gross financing needs by 6 percentage points. The medium-term measures are expected to reduce Greece’s debt-to-GDP ratio further by another 30 percentage points until 2060 and the country’s gross financing needs by another 8 percentage points.
The ESM will continue to cooperate with the Greek authorities under the ESM’s Early Warning System, designed to ensure that beneficiary countries are able to repay the ESM as agreed. For that purpose, the ESM will receive regular reporting from Greece and will join the European Commission for its regular missions under the Enhanced Surveillance framework.
The International Monetary Fund (IMF) also disbursed a total loan volume of 32.1 billion euros to Greece in parallel to the Greek Loan Facility and the EFSF program of which around 21 billion euros has already been repaid. However, the IMF did not disburse any money to Greece in parallel to the ESM program.
