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A four-month extension to the current Greek bailout programme was agreed on 20 February 2015 between the new Greek government and the other 18 Eurozone finance ministers. This followed weeks of at times acrimonious negotiations and eased short-term fears of Greece defaulting on its substantial debts, and possibly leaving the Eurozone.
Greece’s economy has undergone a severe recession since the debt crisis began in 2010, with the economy over a quarter smaller now than it was then. Two international bailout programmes in 2010 and 2012 have provided a total of around €240 billion in financial aid to Greece. Attached to these loans have been stringent conditions designed to reduce the budget deficit and improve economic competitiveness.
Against this backdrop of continued severe economic and social pain, the radical left-wing Syriza party, who promised to reject the austerity measures, won the January 2015 election beating the incumbent centre-right New Democracy party.
With the expiration of the current financial assistance programme approaching on 28 February 2015 and the solvency of Greek banks under threat, the Greek government appeared to back down from most of its demands in order to secure an extension until the end of June. A successful implementation of this deal will result in around €7 billion (€5.2 billion) in financial assistance to Greece. This will likely occur after the end of April when economic reforms put forward by Greece will need to be approved by its creditors (the other Eurozone member states, International Monetary Fund and the European Central Bank).
In the meantime, Greece still faces questions over whether it will have the means to make debt repayments that are due in March and April. A solution to this problem is considered likely but a longer-term agreement to secure Greece’s future is far from certain. The question of whether Greece will stay or leave the Eurozone is far from settled.
Briefing written by Daniel Harari.
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