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Feb. 2010
Greek government reveals that budget data had previously been misreported
March 2010
Greek borrowing costs rise to unsustainable levels
May 2010
Feb 2012
2nd programme for Greece agreed, to be provided by EFSF and IMF
Mar 2012
Yield on Greek 10-year bonds peaks at 33.7%; restructuring (53.5% haircut) of Greek government bonds held by banks
Greece’s economy starts growing after 6 years of decline
Apr 2014
Greece returns to bond issuance for the first time in 4 years
Jan 2015
New government announces major policy shift, halting previous reform agenda
Jul 2015
Eurogroup leaders agree with Greece on new loan in exchange for reforms
Aug 2015
ESM Board of Governors approves ESM programme for Greece ESM makes first loan disbursement of €13 bn to Greece
Dec 2015
ESM provides €5.4 bn loan to Greece for recapitalisation of two banks: Piraeus and NBG

Bringing Greece back to growth

A third assistance programme for Greece

The euro area is making an unprecedented effort to put the Greek economy back on track. The loan packages from the ESM and EFSF are by far the largest the world has ever seen. The two institutions own half of Greece’s debt. The vast and deeply rooted problems in Greece mean the programmes have lasted much longer than those of other crisis-hit countries. The loans, at very low interest rates with long maturities, are giving Greece fiscal breathing space to bring its public finances in order. And because of the ESM’s cash-for-reform approach, Greece is making impressive progress in modernising its economy.

Greece has received two thirds of the total funds disbursed by the ESM and the EFSF. The money is lent under strict conditions. Athens must implement a host of tough reform measures. It must fix its banking system, ensure sound public finances, and liberalise markets. Creditors are closely monitoring progress in achieving these measures. They only disburse money when Greece takes the steps it has promised.

In the middle of 2015, Athens entered a new ESM programme of up to €86 billion. It was the third programme for the country. The decision sparked fierce public debate across Europe. In part this was due to the acrimonious negotiations preceding the decision.

ESM loans help make Greece’s debt sustainable

The structural reform programme Greece has committed to will galvanise economic growth. Moreover, the EFSF and ESM loans lead to substantially lower financing costs for the country. That is because the two institutions can borrow cash much more cheaply than Greece itself, and offer a long period for repayment. Greece will not have to start repaying its loans to the ESM before 2034, for instance.

These lower costs are passed on to Greece, which helps to make its debt more sustainable. Many people say that Greece’s debt level is too high. They point to the debt-to-GDP ratio, which stands at more than 180%. But this overlooks the ESM’s favourable lending conditions, which feature low financing costs and long repayment periods.

Why three programmes?

By the start of 2010, investors would no longer lend money to Greece. Private investors did not believe that they would get their money back. Athens had to ask for help. It was an unprecedented event. The EU had not foreseen a possible default of a euro area member. There were no European institutions to deal with such a crisis. Markets were speculating that the euro area could break up.

To help Greece finance itself, euro area countries lent Greece €52.9 billion on a bilateral basis. The IMF also provided money. In 2012, this turned out not to be enough. By then, the EFSF had been established. It provided the bulk of a second programme, in which a total of €141.8 billion was disbursed, again with a contribution from the IMF. Banks and other investors contributed by writing down part of the value of their debt holdings, in the so-called Private Sector Involvement (PSI) programme.

In 2014, the effects started to show. The Greek economy returned to growth, and unemployment began to drop. Athens was even able to raise money in markets again. In January of the following year, a snap election brought a new government to power. The reform programme was suspended and Greece fell back into recession.

The new government could not come to terms with creditors about the reforms the previous government had promised. The assistance programme was extended twice in the first half of 2015 but finally expired in June 2015. The country ran out of money and missed debt payments to the IMF. In order to stop a bank run, it had to limit the amount of cash people could take out of their bank accounts. The Athens stock exchange was closed. A new third programme was only agreed to at the last minute in August 2015, after two further months of negotiations.

The cause of Greece’s problems

The Greek economy had always been relatively closed, and controlled by vested interests. When the country joined the euro in 2001, it was suddenly able to borrow money at a far lower rate than previously. As a result, the government boosted spending. At the same time, revenues weakened, in part because of a poor tax administration. Public debt soared quickly. Wages rose too fast and the country became too expensive to compete internationally. In the past, this would have caused the drachma to devalue against other currencies. In the euro area, that option no longer existed. The result was a contracting economy and unemployment rising to alarming levels.

ESM Disbursements to Greece*

(max. total committed: €86 billion; availability period ends on 20 August 2018)  

Date of disbursement Amount disbursed Type of disbursement Maturity Cumulative amount disbursed
20/08/2015 €13 billion Cash Amortisation from 2034 to 2059 €13 billion
24/11/2015 €2 billion Cash Amortisation from 2034 to 2059 €15 billion
01/12/2015 €2.7 billion Cashless Interim maturity coinciding with maturity of ESM notes** €17.7 billion
08/12/2015 €2.7 billion Cashless Interim maturity coinciding with maturity of ESM notes** €20.4 billion
23/12/2015 €1 billion Cash Amortisation from 2034 to 2059 €21.4 billion
21/06/2016 €7.5 billion Cash Amortisation from 2034 to 2059 €28.9 billion
26/10/2016 €2.8 billion Cash Amortisation from 2034 to 2059 €31.7 billion

Weighted average maturity of loans (excluding cashless disbursements): 31.97 years

*The ESM has issued floating rate notes (see below) for the purposes of funding bank recapitalisation/resolution. Notes amounting to €5.4 billion were disbursed to Greece; the remaining €4.6 billion was not used and the notes were subsequently cancelled.
**The amount was disbursed pro rata in ESM floating rate notes listed below. The final maturity will be in line with the maximum weighted average loan maturity of 32.5 years.


Floating rate notes issued by the ESM

ISIN Issuance date Maturity Type Amount
EU000A1U9852 27/08/2015 27/02/2017 FRN €3 billion
EU000A1U9860 27/08/2015 27/08/2017 FRN €3 billion
EU000A1U9878 27/08/2015 27/02/2018 FRN €4 billion


Previous financial assistance for Greece

Euro area Member States provided the first financial assistance package to Greece, supplying €52.9 billion in bilateral loans under the Greek Loan Facility. EFSF financial assistance, part of the second programme, ran from March 2012 through June 2015. In this programme, the EFSF disbursed a total of €141.8 billion, of which €130.9 is outstanding.

More details about EFSF financial assistance for Greece


  • Up to €86 billion
    Total amount committed to Greece in new ESM programme
  • 37%
    percentage disbursed of total committed amount to Greece (€86 bn)
  • €5.4 billion
    amount disbursed to Greece for bank recapitalisation in new ESM programme
  • 32 years
    weighted average maturity of ESM loans to Greece
  • 49% of GDP (2013)
    Greece’s savings in its total debt held by its European partners, measured in net present value terms
  • 5 years
    the maturity of the first bond issued by Greece when it returned to bond markets in April 2014, the first time in four years
  • 0.7%
    Average interest rate on ESM loans to Greece (as of 31/12/2015)
  • €107 billion
    reduction in Greece’s debt stock thanks to private sector haircut in March 2012
  • 10 years
    deferral on loan repayments agreed by Eurogroup in November 2012


The Greek Loan Facility is the first financial support programme for Greece, agreed in May 2010. It consisted of bilateral loans from euro area countries, amounting to €52.9 billion, and a €20.1 billion loan from the IMF. The EFSF, which was only established in June 2010, did not take part in this programme.

Thanks to the debt relief measures approved by the Eurogroup, the Greek government saved an equivalent of 49% of its 2013 GDP. This includes savings of 34% of GDP thanks to eased conditions on EFSF loans to Greece.

Greece’s debt was significantly reduced with the private sector haircut in March 2012. The improvement of the lending terms for Greece agreed by the European creditors has also resulted in a significant alleviation of the debt.

In November 2012, the Eurogroup approved a set of measures designed to ease Greece’s debt burden and bring its public debt back to a sustainable path. These measures included:

  • reducing the interest rate charged to Greece on the bilateral loans in the context of the Greek Loan Facility (GLF) by 100 basis points;
  • cancelling the EFSF guarantee commitment fee of 10 basis points (it is estimated that this will save a total of €2.7 billion over the entire period of EFSF loans to Greece);
  • extending the maturity of GLF and EFSF loans by 15 years (to an average loan maturity of over 30 years), significantly improving the country’s debt profile.
  • deferring interest rate payments on EFSF loans by 10 years (it is estimated that this will lower the country’s financing needs by €12.9 billion by 2022);
  • passing on to Greece an amount equivalent to the income of the ECB’s Securities Markets Programme (SMP) portfolio accruing to their national central bank. 

Thanks to the reforms carried out by Greece as part of the second financial assistance programme, the Greek economy returned to a path of economic growth – it a achieved GDP growth of 0.7% in 2014 after six years of recession. As a result, yields on Greek bonds came down to levels which enabled the Greek government to return to market financing. Greece successfully issued two bonds in that year: a 5-year bond in April, and a 3-year bond in July.

Greece has managed to significantly reduce its macroeconomic and fiscal imbalances. An unprecedented fiscal adjustment has resulted in a decline of the general government deficit by more than 12 percentage points of GDP, from 15.6% in 2009 to an expected 3.1% in 2016.

The Greek economy has improved its competitiveness by reducing unit labour costs. The improvement can be seen in the falling current account deficit: from 18% in 2008 to an expected 0.6% in 2016. Furthermore, Greece has made major progress in carrying out structural reforms – it is the best performing economy in terms of implementing OECD recommendations on structural reforms.

Greece is also making its economy more efficient thanks to improved business regulations. This can be seen in Greece’s rapid progress in the World Bank’s Doing Business ranking: from 109th position in 2010 to 60th in 2015.

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