interest rate (approximately 5%, which is lower than what Greece had paid in recent bondsales), if supplemented by additional loans from the IMF and if the Greek governmentimplemented substantial austerity measures over the next three years. On April 23, 2010, theGreek government formally requested the activation of this mechanism and the final packagewas announced the following week. Of the Eurozone member states, Germany is reportedlyproviding the largest loan, expected to be €22.4 billion (about $29 billion) over the three-yearperiod, followed by France, which is expected to loan Greece €16.8 billion (about $22billion). With payment deadlines on Greek bonds looming, European leaders are aiming toexecute the loan arrangements quickly. Due to ifferent legal requirements among Eurozone15
countries—final approval requires a parliamentary vote in some countries—the loans willlikely not all be available at the same time. Advocates of quick implementation overcame amajor hurdle, however, when the German parliament approved German participation in theplan on May 7, 2010.Debates over Eurozone Member State InvolvementProviding financial assistance to Greece has been controversial. Many Eurozone countries,including Germany, had to overcome considerable political resistance to providing support toGreece. Opponents of EU assistance to Greece expressed exasperation with the idea ofrescuing a country that, in their perspective, has not exercised budget discipline, had failed tomodernize its economy, and had allegedly falsified financial statistics. Opponents also raisedthe issue of moral hazard and wished to avoid setting a “bail out” precedent. Likewise,providing IMF funds to Greece sparked intense debate, because the IMF has not lent todeveloped countries in recent decades and the IMF program for Greece is quite large relativeto the size of its economy. Economic reforms have also been difficult for the Greekgovernment for domestic political reasons. Papandreou’s Panhellenic Socialist Movement(PASOK) came to office in October 2009 on a platform of social protection, promising toboost wages, improve support for the poor, and promote redistribution of income. Thepolicies his government has since pursued to cut the budget deficit have required a full-scaleretreat from these campaign pledges and are proving increasingly difficult to see through.Tens of thousands of public sector workers and their supporters have taken to the streets toprotest the reforms. An opinion poll in June 2011 indicated that close to 50% of Greekswanted parliament to reject new austerity measures, with only 35% in favor of parliamentaryapproval. Unemployment in Greece more than doubled between 2008 and 2011, rising from7.7% to 15.8%. The inclusion of bondholders in the crisis response in July 2011 signaled amajor shift in the approach to responding to the crisis, which previously had focusedprimarily on the provision of financial assistance to Greece and economic reforms in Greece.
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