Greece Is Expected To Gain More Than One Billion Euros In Aid

At the end of last week, the economic and financial committee, composed of the vice ministers and senior officials of the 17 countries of the euro zone, adopted second rounds of aid in principle.

The euro zone's decision is based on the joint assessment of the three sides of the European Union, the International Monetary Fund (IMF) and the European Central Bank.

Aid extended to 2014

German media 6, said the German Ministry of finance, the European Union, IMF and the European Central Bank believe that if Greece can not be self financing in 2013 and 2014, the size of the new aid plan will exceed 100 billion euros.

The effective period of the second round of assistance will be extended from the first round of 2013 to the mid 2014.

Last May, Greece and the European Union and IMF reached the first aid agreement with a scale of 110 billion euros, valid until 2013.

Under the agreement, Greece should raise 27 billion euros from the bond market in 2012 and raise 38 billion euros in 2013.

But now the European Union has reached a consensus that Greece cannot return to the bond market in 2012.

The new aid is designed to help Greece fill the financing needs during this period.

However, the new plan may require the private sector to invest 30 billion euros.

The eurozone will now require Greece's private sector creditors to pform their imminent debt into new long-term debt.

In addition, the eurozone will use the European financial stability fund to provide new aid loans to Greece, but the additional conditions may require banks, pension funds and other Greek debt holders to extend the debt maturity as well.

It is revealed that the euro area also wants the ECB to accept new bonds as collateral for loans to encourage new and old debt pfers.

At present, there are still many uncertainties in the specific aspects of the new plan. For example, the size of the assistance of each investor, the details of the plan are expected to be determined before the euro zone finance ministers meeting held in June 20th and approved at the meeting.

If the new plan is approved successfully, the debt conversion will start as early as July.

According to the latest data released by the BIS, by the end of 2010, the German bank was the largest holder of Greek bonds, holding 22 billion 700 million US dollars in Greek government bonds, and French banks holding 15 billion US dollars in Greek bonds in second place.

The two countries' holdings of Greek bonds account for 69% of the total debt of Greece, making it possible for German and French banks to become negotiating parties for the aid program. Greece's fiscal tightening and economic reform will probably have to listen to the views of German and French banking giants in the future.

The three week assessment of Greece by the European Union, the IMF and the European central bank ended last week. The 3 day assessment report said that Greece has made good progress in economic reform, but the country must continue to accelerate the consolidation of fiscal and structural reforms, further reduce the deficit and restore economic growth.

According to the report, Greece's economic recession was higher than expected in 2010, and the economy is expected to stabilize at the end of this year and early next year.

Greece needs to increase its deficit reduction efforts

At the same time, the three party assessment group warned in the assessment report that the Greek government "needs to strengthen structural reforms in finance and wider fields, further reduce the deficit, realize the numerous reforms needed to improve the business environment and sustainable economic recovery".

The Greek government says it is committed to implementing a medium-term budget plan, which aims to reduce the fiscal deficit to gross domestic product (GDP) from 10.5% in 2010 to 7.5% this year.

The specific measures will include: substantially reducing the number of employees in the public sector, restructuring or closing public enterprises, optimizing social welfare programs, reducing tax-free items, raising real estate taxes, cracking down on tax evasion, creating a professional and independent state asset management agency, and selling state-owned assets including Greek Telecom and Greek public power companies, aiming to achieve the goal of earning 50 billion euros in 2015.

Greece's Ministry of Finance said 4 details of the above plan will be identified in the next few days and submitted to parliament after being approved by the cabinet.

Analysts believe that the first year of the implementation of the rescue plan has proved that Greece can not complete the deficit reduction plan as scheduled, the EU and IMF to Greece to implement the new debt repayment method of old debt, after all, only to postpone the country's default date, and the risk of debt holders will also accumulate.

"I don't see how Greece will eventually avoid some kind of default," said Martin Bailey, a senior fellow at the Brookings Institution and chairman of the Clinton administration's Economic Advisory Committee.

In addition, the Greek people have been protesting the new round of fiscal tightening in various ways for weeks. Not only the Greek opposition party threatened to oppose the new plan in the parliamentary vote, but also the voices of the Greek ruling Social Movement Party.

In the eyes of the Greeks, the cost of obtaining aid is the "unprecedented" intervention by external forces to the country's economy.