July 9, 2011
Greece won approval from the International Monetary Fund for a 3.2 billion-euro ($4.6 billion) payment under a joint loan with the European Union, buying policy makers time to craft a second rescue package and avert the first sovereign default in the euro region.
Greek commitments made to secure the loan are “delivering important results,” IMF Managing Director Christine Lagarde said yesterday in statement from Washington. Still, “a durable fiscal adjustment is needed, lest the deficit get entrenched at an unsustainably high level, and productivity-enhancing reforms should be accelerated, lest growth fail to recover.”
The decision follows last week’s authorization by European finance ministers to unblock 8.7 billion euros as talks continue on how to include banks and insurers in a new package for Greece, which can’t return to international financial markets next year because of surging borrowing costs. The option of involving the private sector has been criticized by the European Central Bank because it could trigger a partial default.