(VOVworld)- Greece’s public debt crisis has seen positive developments when Eurogroup, a group of 19 finance ministers of the eurozone, reached an important agreement last week. A new rescue package of 10.3 billion euros (11.48 billion USD) will be disbursed and Athens’ debts will be restructured as demanded by the International Monetary Fund (IMF). But Greece has to pay a high price for the aid package and cannot get rid of public debt pressure in the short term.
After an 11-hour meeting in Brussels, Belgium, on May 25th, eurozone countries agreed on a new loan for Greece as Athens has to pay debts to the IMF and the European Central Bank (ECB) in July. Greece will benefit from the ECB’s repurchase of bonds, an issue hotly debated during rescue negotiation rounds last year.
IMF’s European Department Director Poul Thomsen said the agreement shows Europe’s readiness for sustainable rescue measures, adding that IMF will only provide loans after assessing actual effects of the new decision. According to France’s Finance Minister Michel Sapin, the agreement demonstrates trust in Greece. Dutch Finance Minister Jeroen Dijsselbloem, who is also Chairman of Eurogroup, emphasized Athens’ recent efforts to tighten the belt and reform the tax system. Greek Finance Minister Euclid Tsakalotos told reporters after the meeting in Brussels that the latest decision will provide a clear roadmap for investing in Greece.
In return for the rescue package, Athens has to adopt austerity measures and conduct reforms, meaning it will face greater domestic pressure. Ahead of the eurozone finance ministers’ meeting, Greek Parliament was reluctant to approve pension cut and tax increase demanded by debtors. These measures received support from 153 parliamentarians of the ruling coalition out of a 300-member Parliament. Tens of thousands of Greeks took to the streets to protest the government because the new taxes will make them lose an average of 810 euro per head annually.
For a longer term, observers say Greece remains under pressure even with a recent 10.3 billion euro package. On May 23rd, the IMF said with public debts reaching 180% of GDP Greece can hardly pay back and its public debts may jump to 250% of GDP by 2060 if debt restructure is not in place.