Greece shapes up enough to expect EU €9bn tranche
GREECE is on track to secure the next loan instalment from the EU bailout fund next month, after the European Commission said the country is ahead of schedule in meeting its deficit-cutting commitments and making structural reforms.
The commission expects euro area finance ministers to approve the second rescue loan on September 7. The total amount of the next portion is €9bn, with an EU contribution of €6.5bn and a €2.5bn contribution from the International Monetary Fund (IMF).
Commission spokesman Amadeu Altafaj said that defi- cit cuts "are going even faster than planned. Greece is on track to meet its commitments as part of a very ambitious and demanding programme".
Athens aims to reduce the deficit from 13.6pc of gross domestic product (GDP) last year to the EU limit of 3pc in 2014.
In May Prime Minister George Papandreou pledged further wage cuts, as well as tax increases on alcohol, fuel and tobacco, in return for emergency loans from the IMF and EU to stave off a default. The loans carry a 5pc interest rate.
The loan for Greece will not be held up by objections from Slovakia, the commission said. Slovakia's parliament rejected participation last week, ending the EU's unity in handling the sovereign-debt crisis.
The government opposed the aid, saying poor countries shouldn't pay for the profligacy of richer ones.
The loan is part of a three-year, €110bn rescue package for Greece, which still faces "important challenges and risks", an IMF team assessing Greece said on August 5.
Investor concern about the debt-ridden nation led to a surge in its borrowing costs that pushed the country to the brink of default and fuelled speculation about a break-up of Europe's single currency.
The country's economy has contracted for the seventh quarter in a row, as the wage cuts and tax increases that aim to trim the EU's second-biggest budget deficit deepened a recession.
GDP shrank 1.5pc in the second quarter from the previous three months, the Greek statistical authority said last week.