The First Economic Adjustment Programme for Greece, initially called the Economic Adjustment Programme for Greece and usually referred to as the first bailout package or the first memorandum, is a memorandum of understanding on financial assistance to the

Hellenic Republic Greece, officially the Hellenic Republic, is a country in Southeast Europe. Located on the southern tip of the Balkan peninsula, it shares land borders with Albania to the northwest, North Macedonia and Bulgaria to the north, and Turkey to th ...

in order to cope with the

Greek government-debt crisis Greek may refer to: Anything of, from, or related to Greece, a country in Southern Europe: *Greeks, an ethnic group *Greek language, a branch of the Indo-European language family ** Proto-Greek language, the assumed last common ancestor of all kn ...

. It was signed on 3 May 2010 by the

Greek Government The Government of Greece (Greek language, Greek: Κυβέρνηση της Ελλάδας), officially the Government of the Hellenic Republic (Κυβέρνηση της Ελληνικής Δημοκρατίας) is the collective body of the Gre ...

under then-prime minister George Papandreou on one hand, and on the other hand by the

European Commission The European Commission (EC) is the primary Executive (government), executive arm of the European Union (EU). It operates as a cabinet government, with a number of European Commissioner, members of the Commission (directorial system, informall ...

on behalf of the

Eurogroup The Eurogroup is the recognised collective term for the informal meetings of the finance ministers of the eurozone—those member states of the European Union (EU) which have adopted the euro as their official currency. The group has 20 members ...

, the

European Central Bank The European Central Bank (ECB) is the central component of the Eurosystem and the European System of Central Banks (ESCB) as well as one of seven institutions of the European Union. It is one of the world's Big Four (banking)#International ...

(ECB) and the

International Monetary Fund The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution funded by 191 member countries, with headquarters in Washington, D.C. It is regarded as the global lender of las ...

(IMF). Of the totaling €107.3 billion of financial assistance, €72.8 billion were disbursed by 1 March 2012, when the programme was superseded by the

Second Economic Adjustment Programme for Greece The Second Economic Adjustment Programme for Greece, usually referred to as the second bailout package or the second memorandum, is a memorandum of understanding on financial assistance to the Hellenic Republic in order to cope with the Greek go ...

comprising the undisbursed amounts of the first programme and additional €130 billion for the years 2012–14.

Background

Having had the credit rating agencies further downgrade their assessment of Greece's ability to honour its debts, the risk premiums on long-term Greek

government bonds A government bond or sovereign bond is a form of bond issued by a government to support public spending. It generally includes a commitment to pay periodic interest, called coupon payments'','' and to repay the face value on the maturity da ...

reached record (and unsustainable) levels. On 23 April 2010 the Greek government requested official financial assistance from the rest of the European Union and the IMF.

Memorandum of Understanding

George Papandreou and Jose Manuel Barroso

Financial aid

On 1–2 May 2010,

(ECB) and the

(IMF), colloquially called the

European troika The Troika is a term used to refer to the single decision group created by three entities, the European Commission (EC), the European Central Bank (ECB) and the International Monetary Fund (IMF). It was formed due to the European debt crisis as ...

, agreed with the Greek government in a three-year financial aid programme that was outlined in a Memorandum of Understanding. The total amount of €110 billion would consist of €80 billion bilateral loan commitments provided by the

and pooled by the European Commission in the Greek Loan Facility (GLF), and additional €30 billion to be provided under a Stand-By Arrangement (SBA) by the IMF, which was headed at the time by Dominique Strauss-Kahn. Instrumental in determining the rates of the individual euro area countries in the €80bn of the Eurozone was the respective equity interest in the capital of the ECB, which in turn is determined every five years after the prorated share of a country in the total population and economic output in the EU. The German share of the €80bn was 28%, or about €22.4bn in three years while France paid €16.8bn. The amount of €80 billion to be provided by the Eurogroup was later reduced by €2.7bn, as

Slovakia Slovakia, officially the Slovak Republic, is a landlocked country in Central Europe. It is bordered by Poland to the north, Ukraine to the east, Hungary to the south, Austria to the west, and the Czech Republic to the northwest. Slovakia's m ...

decided not to participate in the Greek Loan Facility Agreement and as

Ireland Ireland (, ; ; Ulster Scots dialect, Ulster-Scots: ) is an island in the North Atlantic Ocean, in Northwestern Europe. Geopolitically, the island is divided between the Republic of Ireland (officially Names of the Irish state, named Irelan ...

and

Portugal Portugal, officially the Portuguese Republic, is a country on the Iberian Peninsula in Southwestern Europe. Featuring Cabo da Roca, the westernmost point in continental Europe, Portugal borders Spain to its north and east, with which it share ...

had to step down from the facility themselves requesting financial assistance.

Commitments of the Greek government

The Greek debt in exchange for household should be consolidated within three years, so that the budget deficit should be reduced by 2014 to below 3 percent. The minutes of the

IMF The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution funded by 191 member countries, with headquarters in Washington, D.C. It is regarded as the global lender of la ...

Executive Board were revealed nearly four years later, and highlight amongst other items, the fear that Greek social cohesion could be at risk. The Greek private sector, it was learned in 2014, was amenable to the deal because it curtailed the practice of paying civil servants a 13th and a 14th "month" each year. This curtailment was impossible for the Greek government to achieve on its own because of the political pressure inherent to the system.

Disbursement

In May 2010 Greece received the first

tranche In structured finance, a tranche () is one of a number of related securities offered as part of the same transaction. In the financial sense of the word, each bond is a different slice of the deal's risk. Transaction documentation (see indent ...

of the bailout loans totaling €20bn. Of this total, 5.5 billion came from the IMF and 14.5 billion of Euro states. On 13 September the second tranche of €6.5bn was disbursed. The 3rd tranche of the same amount was paid on 19 January 2011. On 16 March, 4th tranche in the amount of €10.9 billion was paid out, followed by the 5th installment on 2 July. The 6th tranche of €8bn was paid out after months of delay in early December. Of this amount, the IMF provided €2.2bn.IMF Executive Board Completes Fifth Review Under Stand-By Arrangement for Greece and Approves €2.2 Billion Disbursement
Internationaler Währungsfonds, 5. Dezember 2011.

References

Literature

* {{cite book, ref=ocp61, url=http://ec.europa.eu/economy_finance/publications/occasional_paper/2010/pdf/ocp61_en.pdf, title=The Economic Adjustment Programme for Greece, author=European Commission, authorlink=European Commission, series=Occasional Papers, issue=61, date=May 2010, place=Brussels, isbn=978-92-79-15074-6, doi=10.2765/46750

External links

Financial assistance to Greece
on the website of the European Commission Greek government-debt crisis Eurozone crisis 2010 in Greek politics 2011 in Greek politics 2012 in Greek politics Economic adjustment programmes of the European Union