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More Greek aid

Christoph Hasselbach, Brussels / jrbDecember 13, 2012

Eurozone finance ministers have given final approval for the release of new aid payments to Greece, ending a long stalemate and giving the country more time to push ahead with reforms.

A European Union left and the Greek flag wave above the ancient Parthenon temple, at the Acropolis Hill, in Athens on Monday, July 11, 2011.Greece's Socialist government on Monday named a five-member committee to head a euro50 billion ($71.2 billion) privatization program aimed at easing the country's euro340 billion ($484.2 billion) national debt. (Foto:Petros Giannakouris/AP/dapd)
Image: AP

For Greece, a long "odyssey" has finally come to an end. That's the word EU Economic and Monetary Affairs Commissioner Olli Rehn chose to describe the end of many months of uncertainty for Greece.

After one of the eurozone finance ministers' briefest meetings ever, the eurozone president Jean-Claude Junker announced a "final green light" for an additional payout of 49 billion euros under the second Greek aid program.

Greecewill receive 34.3 billion euros in the coming days - without any further conditions. Another 15 billion euros will follow at the beginning of next year. A part of this aid, however, is linked to conditions, including the implementation of a tax reform.

Curbing tax evasion

Greece's acute problems with collecting taxes are considered one of the greatest weaknesses of its sprawling public administration.

Rehn said the battle to curb tax evasion is essential to ensure healthy public finances and is also a question of social justice.

German Finance Minister Wolfgang Schaeuble (L) chats with President of the Eurogroup Luxembourg's Prime Minister Jean-Claude Juncker EPA/OLIVIER HOSLET
Schäuble and Junker admit debt-payback has been priceyImage: picture-alliance/dpa

Initially, the eurozone ministers debated a debt relief package of 44 billion euros before agreeing to increase the figure to 49 billion euros. According to German Finance Minister Wolfgang Schäuble, the additional 5 billion euros are linked to the Greek debt-buyback program, which played a role in the finance ministers' final decision.

The International Monetary Fund (IMF), in particular, insisted on the debt-buyback program as a condition for their continued support of Greek aid efforts.

Unpredictable political situation

The program, completed a few days ago, enabled Athens to retire nearly 20 billion euros in bonds repurchased at a third of their value from private investors.

But there were problems. The deadline had to be extended several days and the program turned out to be more expensive than expected. It was funded through the European Financial Stability Facility (EFSF).

European Economic and Monetary Affairs Commissioner Olli Rehn REUTERS/Yves Herman (BELGIUM - Tags: POLITICS BUSINESS)
Olli Rehn is glad the long 'odyssey' is over for GreeceImage: Reuters

"Today's decision by the Eurogroup marks the conclusion of many long months of uncertainty in Greece," Rehn said.

After a low point in spring, the approval of funds for the country opens "the way for a return of confidence of investment, growth and job creation," he added. "At that time, a highly unpredictable political situation had many observers convinced that the game was up for Greece in the euro area. As we approach the end of this turbulent year, those Cassandras have been proved wrong."

Good omen

But Greece can ill afford to lean back and rest. The country must continue on its consolidation course.

The decision to provide extra aid was, in any case, a huge relief for EU leaders meeting at a summit through Friday. Greece has been a topic that has weighed down numerous summits in the past.

This time, eurozone finance ministers have cleared the problem in advance. This decision, together with approval for bank supervision by the 27 EU member states, is seen as a good omen for the summit.