Greek Bailout Could Be Finalized Today

February 19, 2012 International Tax Cooperation

Greek Bailout Could Be Finalized TodayBRUSSELLS – Greece will need to make even greater efforts to reduce its debts and commit to its austerity plans, if the government hopes to secure a EUR 130 billion bailout from the EU and the International Monetary Fund.

A meeting between the Prime Minister of Greece Lucas Papademos and leaders of 17 countries of the European Union to discuss the conditions of the new bailout for Greece is set to take place in Brussels today, on February 20th.

The bailout currently being debated is worth approximately EUR 130 billion in payments from the International Monetary Fund and the European Union, and was tentatively agreed to in October 2011. However, before the conditions of the bailout can be finalized and the payment completed, the IMF and the EU are seeking assurance that the money would be used effectively and will actively aid Greece in reducing its external debts and liabilities.

Amongst the points being discussed at today’s meeting is the possibility of instating an escrow account for the bailout payment, which would be under the control of an independent third party. The account would prioritize payment of external debts over spending on Greek government services, and would ensure that Greece follows its own austerity plans. It is thought that the account will also reduce the destabilizing economic effects of a potential debt default by Greece. Some political experts have suggested that Greece might also be asked to transfer at least part of its tax revenue collections into the escrow account.

At today meeting the leaders of the EU will also discuss further measures which can be implemented to speed Greece’s debt reduction. In October 2011 the IMF set an economic target for Greece to reduce its own debt levels to 120 percent of GDP by 2020, from the current level of 160 percent. However, the latest forecasts from the IMF and the European Central Bank indicate that under the present economic conditions the country will only be able to lower debts to 129 percent of GDP in the set time limit.

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