interest rate approximately 5 which is lower than what Greece had paid in

Interest rate approximately 5 which is lower than

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interest rate (approximately 5%, which is lower than what Greece had paid in recent bond sales), if supplemented by additional loans from the IMF and if the Greek government implemented substantial austerity measures over the next three years. On April 23, 2010, the Greek government formally requested the activation of this mechanism and the final package was announced the following week. Of the Eurozone member states, Germany is reportedly providing the largest loan, expected to be €22.4 billion (about $29 billion) over the three-year period, followed by France, which is expected to loan Greece €16.8 billion (about $22 billion). With payment deadlines on Greek bonds looming, European leaders are aiming to execute the loan arrangements quickly. Due to ifferent legal requirements among Eurozone 15
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countries—final approval requires a parliamentary vote in some countries—the loans will likely not all be available at the same time. Advocates of quick implementation overcame a major hurdle, however, when the German parliament approved German participation in the plan on May 7, 2010. Debates over Eurozone Member State Involvement Providing financial assistance to Greece has been controversial. Many Eurozone countries, including Germany, had to overcome considerable political resistance to providing support to Greece. Opponents of EU assistance to Greece expressed exasperation with the idea of rescuing a country that, in their perspective, has not exercised budget discipline, had failed to modernize its economy, and had allegedly falsified financial statistics. Opponents also raised the 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 to developed countries in recent decades and the IMF program for Greece is quite large relative to the size of its economy. Economic reforms have also been difficult for the Greek government for domestic political reasons. Papandreou’s Panhellenic Socialist Movement (PASOK) came to office in October 2009 on a platform of social protection, promising to boost wages, improve support for the poor, and promote redistribution of income. The policies his government has since pursued to cut the budget deficit have required a full-scale retreat 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 to protest the reforms. An opinion poll in June 2011 indicated that close to 50% of Greeks wanted parliament to reject new austerity measures, with only 35% in favor of parliamentary approval. Unemployment in Greece more than doubled between 2008 and 2011, rising from 7.7% to 15.8%. The inclusion of bondholders in the crisis response in July 2011 signaled a major shift in the approach to responding to the crisis, which previously had focused primarily on the provision of financial assistance to Greece and economic reforms in Greece.
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