Greece: Financial Support
House of Lords
Lord Sassoon (Commercial Secretary, HM Treasury; Conservative)
Two financial assistance packages for Greece have been agreed to date. The first package, agreed in May 2010 and worth €110 billion over three years, comprised a loan from the International Monetary Fund (IMF) of €30 billion and a package of bilateral loans from euro area member states of €80 billion.
The second package, agreed on 14 and
The IMF's contribution to the new programme, which will last until the beginning of 2016, will be €28 billion. This includes €10 billion from the first programme which is yet to be disbursed. Although the IMF has ultimately committed €48 billion in loans to Greece over the period 2010 to 2016, its maximum exposure at any time will not exceed €33 billion, as Greece, from 2013 onwards, will also start to repay loans from the first programme.
There was no contribution either from the EU budget or from the European Financial Stabilisation Mechanism (EFSM), which is backed by the EU budget. Therefore the UK's exposure to Greece's financial assistance packages is through the IMF alone.
The UK lends to the IMF as an institution and not to particular programmes. It is, therefore, not possible to provide an exact estimate of the UK's contribution to individual IMF programmes. As a rough estimate, we would expect the UK's exposure to overall IMF lending to be in line with its quota share of 4.5%. However, the IMF has preferred creditor status and no country has ever lost money lending to the IMF.
Included within the IMF programme to Greece are measures that aim to strengthen the core social safety net to protect the most vulnerable. For example, the IMF staff's report on the new Greek loan mentions that, in Greece, non-pension social benefits are "complex, unequally distributed ... and poorly targeted (eg 60% of family benefits go to the top 40% of the income distribution)". A review of these social programmes will seek to identify savings by discontinuing non-essential programmes and improving the targeting of core programmes. Some savings from the reforms would be reinvested in strengthening core programmes (for instance unemployment benefits) to protect the most vulnerable.