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Europe

Greece to avoid default after loan agreement

media Agreement will allow Greece to pay wages and pensions Reuters/Yiorgos Karahalis

Greece's international creditors have reached an agreement with Athens on reforms to put its troubled economy back on track and unlock a loan tranche needed to avert default next month.

 

It said that a loan instalment of eight billion euros, part of a 110-billion-euro bailout extended to Greece last year, will be available "most likely in early November" following approval by eurozone finance ministers and the IMF's executive board.

Greece needs the loan to pay wages and pensions from mid-November.

The possibility of Greece defaulting on its loan has sent shockwaves through the global economy with US President Barack Obama calling on Europeans to act fast to stem the crisis.

The EU is scheduled to hold a summit on the crisis on 23 October.

The EU-IMF audit mission gave credit to Greece for achieving a major reduction in the public deficit since the start of the adjustment program in 2010, despite a deep recession.

But it noted that a further contraction in the Greek economy and slippage in the implementation of some agreed measures made the original 2011 deficit reduction target untenable.

The team of auditors from the three organisations, or 'troika', said additional measures announced by the government after a break in the talks in early September "should be sufficient" to maintain the 2012 deficit target of 14.9 billion euros.

But they noted that revenue from a privatisation drive that is an integral part of a new EU rescue of Greece agreed in July will be "significantly lower than expected" because of preparation delays and adverse market conditions.

Eurozone leaders agreed in July to provide Greece with a second bailout and expand the powers of their rescue fund, in order to insulate the European single currency against future shocks.

 

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