Third Economic Adjustment Programme for Greece

Last updated

The Third Economic Adjustment Programme for Greece, usually referred to as the third bailout package or the third memorandum, is a memorandum of understanding on financial assistance to the Hellenic Republic in order to cope with the Greek government-debt crisis.

A memorandum of understanding (MoU) is a type of agreement between two (bilateral) or more (multilateral) parties. It expresses a convergence of will between the parties, indicating an intended common line of action. It is often used either in cases where parties do not imply a legal commitment or in situations where the parties cannot create a legally enforceable agreement. It is a more formal alternative to a gentlemen's agreement.

Greek government-debt crisis economic crisis

The Greek government-debt crisis is the sovereign debt crisis faced by Greece in the aftermath of the financial crisis of 2007–08. Widely known in the country as The Crisis, it reached the populace as a series of sudden reforms and austerity measures that led to impoverishment and loss of income and property, as well as a small-scale humanitarian crisis. In all, the Greek economy suffered the longest recession of any advanced capitalist economy to date, overtaking the US Great Depression. As a result, the Greek political system has been upended, social exclusion increased, and hundreds of thousands of well-educated Greeks have left the country.


It was signed on 12 July 2015 by the Greek Government under prime minister Alexis Tsipras and it expired on 20 August 2018. [1] [2]

Government of Greece is the government of the Third Hellenic Republic, reformed to its present form in 1974.

Alexis Tsipras Greek politician

Alexis Tsipras is a Greek politician serving as Prime Minister of Greece since 2015.



A Financial Times editorial on 22 February 2012 argued leaders had "proved themselves unable to settle on a solution that will not need to be revisited yet again", that at best the deal could only hope to remedy one part of the Greek disaster, namely the country's debilitated public finances, though it would not likely even do that. [3] The Eurozone's latest plan did, at least, evince consistency with the currency block's previous behaviour:

<i>Financial Times</i> Daily broadsheet business newspaper owned by Nikkei Inc. and based in London

The Financial Times (FT) is an English-language international daily newspaper owned by Nikkei Inc, headquartered in London, with a special emphasis on business and economic news.

Eurozone Area in which the euro is the official currency

The eurozone, officially called the euro area, is a monetary union of 19 of the 28 European Union (EU) member states which have adopted the euro (€) as their common currency and sole legal tender. The monetary authority of the eurozone is the Eurosystem. The other nine members of the European Union continue to use their own national currencies, although most of them are obliged to adopt the euro in the future.

from the start, its approach has been a halfway house of resisting a sovereign default but not doing enough to remove the risk altogether. The reason is obvious: core governments find it politically impossible to put up more money. So it is unfathomable that they did not demand more from private creditors. The debt restructuring leaves Greece and its helpers with €100bn of debt that could have been written down entirely and left funds to address future "accidents" without resorting to a third rescue. If there is another showdown with Greece it will have been caused by this. [3]

Household and corporate bank deposits (including repos) in Greece over time. DepositsAndReposOfPrivateSectorNon-MFIsInMFIsInGreeceByResidentsOfGreece.png
Household and corporate bank deposits (including repos) in Greece over time.

German minister of finance Wolfgang Schäuble and Eurogroup president Jean-Claude Juncker shared the scepticism and did not rule out a third bailout. [4] [5] According to a leaked official report from the European Commission, the ECB and the IMF, Greece may need another €50 billion ($66bn) from 2015 to 2020. [6]

Federal Ministry of Finance (Germany) Ministry of Finance of Germany

The Federal Ministry of Finance, abbreviated BMF, is the cabinet-level finance ministry of Germany, with its seat at the Detlev-Rohwedder-Haus in Berlin and a secondary office in Bonn. The current Federal Minister of Finance is Olaf Scholz (SPD).

Wolfgang Schäuble German politician (CDU), Minister of Finance of Germany

Wolfgang Schäuble is a German lawyer and politician of the Christian Democratic Union (CDU) party whose political career has spanned more than four decades. He is one of the most experienced and longest serving politicians in German history and since 2017 has been the President of the Bundestag.

Eurogroup informal body of ministers of the euro area member states

The Eurogroup is the recognised collective term for informal meetings of the finance ministers of the eurozone—those member states of the European Union (EU) which have adopted the euro as their official currency. The group has 19 members. It exercises political control over the currency and related aspects of the EU's monetary union such as the Stability and Growth Pact. The current President of the Eurogroup is Mário Centeno, the Minister of Finance of Portugal.

In mid-May 2012 the crisis and impossibility to form a new coalition government after elections led to strong speculation Greece would have to leave the Eurozone. The potential exit became known as "Grexit" and started to affect international market behaviour, as well as causing an accelerated decrease of bank deposits in Greek banks (commonly referred to as a bank-run).

Bank run economic problem

A bank run occurs when a large number of people withdraw their money from a bank, because they believe the bank may cease to function in the near future. In other words, it is when, in a fractional-reserve banking system, a large number of customers withdraw cash from deposit accounts with a financial institution at the same time because they believe that the financial institution is, or might become, insolvent; they keep the cash or transfer it into other assets, such as government bonds, precious metals or gemstones. When they transfer funds to another institution, it may be characterized as a capital flight. As a bank run progresses, it generates its own momentum: as more people withdraw cash, the likelihood of default increases, triggering further withdrawals. This can destabilize the bank to the point where it runs out of cash and thus faces sudden bankruptcy. To combat a bank run, a bank may limit how much cash each customer may withdraw, suspend withdrawals altogether, or promptly acquire more cash from other banks or from the central bank, besides other measures.

In Greece, after all attempts to form a government failed following the parliamentary election in May 2012, a new second election in mid-June had to be announced. The new election led to the formation of a government of national salvation of conservative New Democracy with the social democrat PASOK and democratic socialist DIMAR, supporting continued adherence to the main principles outlined by the signed bailout plan. The new government however immediately asked its creditors to be granted two extra years, extending the deadline from 2015 to 2017 before being required to be self-financed, with minor budget deficits fully covered by extraordinary income from the privatisation program.


In August 2013, Schäuble expressed his expectations that "there will have to be another (bailout) program in Greece", a remark drawing heavy criticisms by other members of the German governing coalition. [7] However, soon thereafter the head of the European Stability Mechanism (ESM), Klaus Regling added to Schäuble's remarks, telling the German business daily Handelsblatt that Greece might need a third bailout package as soon as in 2014. [8]

In February 2014, the Troika was reported again to consider offering Greece a third bailout at €15–17bn, but now in conjunction with an additional debt relief for old Troika held debt, through expanding the maturity of the EFSF bonds from 30 to 50 years and lowering the interest rate 0.5% for the initial €80bn debt pile being owed to all other EU member states through the Greek Loan Facility. A decision about this potential third bailout loan, however awaits finalization of the third review of the second bailout programme, and will be conditional Greece comply with all terms specified in that programme - which include final fiscal data should verify that a primary surplus indeed was achieved in 2013. The potential third bailout loan was expected to be finally considered by European Union policy makers in May or June 2014. [9]


After several months of negotiation, on 12 July 2015, the Greek Prime Minister, Alexis Tsipras came to a bailout agreement with lenders for a new ESM program. Greece will get a loan of up to €86 billion, which shall be handed to Greece gradually from 2015 until June 2018. This includes a buffer of up to €25 billion for the banking sector in order to address potential bank recapitalisation and resolution costs. In return, Greece will have to streamline the VAT system and broaden the tax base to increase revenue, reform the pension system, safeguard the full legal independence of ELSTAT, automatically cut public spending to get primary surpluses, reform justice with a view to accelerate the judicial process and reduce costs, implement all OECD toolkit I recommendations, modernise labour market legislation, modernise and strengthen the Greek administration, revoke the laws passed by the Tsipras government counter to the February 20 agreement—except for the one concerning the "humanitarian crisis"— or identify clear compensatory equivalents for the vested rights that were subsequently created (e.g. for the rehiring of fired public servants), recapitalize the banks, and privatize 50 billion of state assets. [10] To help support growth and job creation in Greece up to 2020, the European Commission will help mobilise up to €35 billion to fund investment and economic activity, including in SMEs. The Investment Plan for Europe will also provide funding opportunities for Greece. [11]

On 14 August, after a rancorous all-night debate, the Hellenic Parliament backed the country's new bailout deal, although more than 40 MPs from Syriza voted against the deal and Tsipras had to rely on the support of the opposition: New Democracy, To Potami and PASOK. [12] Following the Parliament's decision, the Eurogroup welcomed the agreement between Greece and its lenders, and initiated the launching of the national procedures required for the approval of the new ESM program. These national procedured were concluded by 19 August, and Greece received the first disbursement of the initial tranche of up to €26bn. A first sub-tranche of €10bn will was made available immediately, but in a segregated account at the ESM, destined for bank recapitalisation and resolution purposes. [13]

See also

Related Research Articles

European debt crisis Multi-year debt crisis in multiple EU countries, since late 2009

The European debt crisis is a multi-year debt crisis that has been taking place in the European Union since the end of 2009. Several eurozone member states were unable to repay or refinance their government debt or to bail out over-indebted banks under their national supervision without the assistance of third parties like other eurozone countries, the European Central Bank (ECB), or the International Monetary Fund (IMF).

European Financial Stability Facility

The European Financial Stability Facility (EFSF) is a special purpose vehicle financed by members of the eurozone to address the European sovereign-debt crisis. It was agreed by the Council of the European Union on 9 May 2010, with the objective of preserving financial stability in Europe by providing financial assistance to eurozone states in economic difficulty. The Facility's headquarters are in Luxembourg City, as are those of the European Stability Mechanism. Treasury management services and administrative support are provided to the Facility by the European Investment Bank through a service level contract. Since the establishment of the European Stability Mechanism, the activities of the EFSF are carried out by the ESM.

2000s European sovereign debt crisis timeline

From late 2009, fears of a sovereign debt crisis in some European states developed, with the situation becoming particularly tense in early 2010. Greece was most acutely affected, but fellow Eurozone members Cyprus, Ireland, Italy, Portugal, and Spain were also significantly affected. In the EU, especially in countries where sovereign debt has increased sharply due to bank bailouts, a crisis of confidence has emerged with the widening of bond yield spreads and risk insurance on credit default swaps between these countries and other EU members, most importantly Germany.

European Financial Stabilisation Mechanism

The European Financial Stabilisation Mechanism (EFSM) is an emergency funding programme reliant upon funds raised on the financial markets and guaranteed by the European Commission using the budget of the European Union as collateral. It runs under the supervision of the Commission and aims at preserving financial stability in Europe by providing financial assistance to member states of the European Union in economic difficulty.

European Stability Mechanism organization

The European Stability Mechanism (ESM) is an intergovernmental organization located in Luxembourg City, which operates under public international law for all eurozone Member States having ratified a special ESM intergovernmental treaty. It was established on 27 September 2012 as a permanent firewall for the eurozone, to safeguard and provide instant access to financial assistance programmes for member states of the eurozone in financial difficulty, with a maximum lending capacity of €700 billion.

Jeroen Dijsselbloem Dutch politician

Jeroen René Victor Anton Dijsselbloem is a Dutch politician of the Labour Party (PvdA) and economist. He is the designated Chairman of the Dutch Safety Board taking office in May 2019. He also serves as Chairman of the Supervisory board of the Wageningen University since 1 April 2019.

A Greek withdrawal from the eurozone is a hypothetical scenario in which Greece withdraws from the Eurozone, likely to allow for the country to deal with its government-debt crisis. As of March 2019, no such withdrawal has occurred, nor is one in prospect. This conjecture has been referred to as "Grexit", a portmanteau combining the English words "Greek" and "exit", and which has been expressed in Greek as ελλέξοδος,. The term "Graccident" was coined for the case that Greece exited the EU and the euro unintentionally. These terms first came into use in 2012 and have been revitalised at each of the bailouts made available to Greece since then.

January 2015 Greek legislative election

The January 2015 Greek legislative election was held in Greece on Sunday, 25 January, to elect all 300 members to the Hellenic Parliament in accordance with the constitution. The election was held earlier than scheduled due to the failure of the Greek parliament to elect a new president on 29 December 2014.

Policy reactions to the Eurozone crisis

The Eurozone crisis is an ongoing financial crisis that has made it difficult or impossible for some countries in the euro area to repay or re-finance their government debt without the assistance of third parties.

The Greek government-debt crisis began in 2009 and, as of November 2017, was still ongoing. During this period, many changes had occurred in Greece. The income of many Greeks has declined, levels of unemployment have increased, elections and resignations of politicians have altered the country's political landscape radically, the Greek parliament has passed many austerity bills, and protests have become common sights throughout the country.

September 2015 Greek legislative election

The September 2015 Greek legislative election was held in Greece on Sunday, 20 September, following Prime Minister Alexis Tsipras' announced resignation on 20 August. At stake were all 300 seats in the Hellenic Parliament. This was a snap election, the sixth since 2007, since new elections were not due until February 2019.

First Economic Adjustment Programme for Greece

The First Economic Adjustment Programme for Greece, initially called the Economic Adjustment Programme for Greece and usually referred to as the first bailout package or the first memorandum, is a memorandum of understanding on financial assistance to the Hellenic Republic in order to cope with the Greek government-debt crisis.

The Second Economic Adjustment Programme for Greece, usually referred to as the second bailout package or the second memorandum, is a memorandum of understanding on financial assistance to the Hellenic Republic in order to cope with the Greek government-debt crisis.

This article details the fourteen austerity packages passed by the Government of Greece between 2010 and 2017. These austerity measures were a result of the Greek government-debt crisis and other economic factors. All of the legislation listed remains in force.

The Economic Adjustment Programme for Cyprus, usually referred to as the Bailout programme, is a Memorandum of understanding on financial assistance to the Republic of Cyprus in order to cope with the 2012–13 Cypriot financial crisis.

The Economic Adjustment Programme for Portugal, usually referred to as the Bailout programme, is a Memorandum of understanding on financial assistance to the Portuguese Republic in order to cope with the 2010–14 Portuguese financial crisis.

Euclid Tsakalotos Greek economist and politician

Euclid Stefanou Tsakalotos is a Greek economist and politician who has been Minister of Finance of Greece since 2015. He is also a member of the Central Committee of Syriza and has represented Athens B in the Hellenic Parliament since May 2012.

2015 Greek bailout referendum

A referendum to decide whether Greece was to accept the bailout conditions in the country's government-debt crisis proposed jointly by the European Commission (EC), the International Monetary Fund (IMF) and the European Central Bank (ECB) on 25 June 2015, took place on 5 July 2015. The referendum was announced by Prime Minister Alexis Tsipras in the early morning of 27 June 2015, and ratified the following day by the Parliament and the President. It was the first referendum to be held since the republic referendum of 1974, and the only one in modern Greek history not to concern the form of government.


  1. "'Μισή' έξοδος από μνημόνιο". Kathimerini .
  2. Greece emerges from eurozone bailout programme - BBC
  3. 1 2 Editorial (22 February 2012). "Greek rescue is still a halfway house". Financial Times. p. 12. Retrieved 28 March 2012.
  4. Scally, Derek (25 February 2012). "Schäuble concedes third Greek bailout on the cards". Irish Times. Retrieved 1 March 2012.
  5. Croft, Adrian (24 February 2012). "Eurogroup head cannot rule out third Greek bailout". Reuters. Retrieved 21 February 2012.
  6. Castle, Stephen (20 February 2012). "Europe Agrees on New Bailout to Help Greece Avoid Default". New York Times. Retrieved 1 March 2012.
  7. "Bitter Euro Truths: Crisis Could Damage Merkel's Campaign". Spiegel Online . 2013-08-27. Retrieved 2015-01-01.
  8. "Crisis Control: Stability Fund Chief Expects Third Greek Bailout". Spiegel Online . 2013-10-04. Retrieved 2015-01-01.
  9. "EU Said to Weigh Extending Greek Loans to 50 Years". Bloomberg. 5 February 2014. Retrieved 11 February 2014.
  10. "Euro Summit statement, 12 July 2015". European Council. Euro Summit. 12 July 2015. Retrieved 6 August 2015.
  11. "A New Start for Jobs and Growth in Greece: Commission Mobilises more than €35 billion from the EU Budget". European Commission. 15 July 2015. Retrieved 15 July 2015.
    * "Euro Summit statement, 12 July 2015". European Council. Euro Summit. 12 July 2015. Retrieved 6 August 2015.
  12. Hope, Kerin (14 August 2015). ""Greek Parliament Approves €85bn Bailout after Rancorous Debate"". Financial Times. Athens. Retrieved 6 August 2015.
  13. "Eurogroup Statement on the ESM Programme for Greece". European Council. Eurogroup. 14 August 2015. Retrieved 19 August 2015.
    * "Eurozone Ministers Approve First Rranche of Greek Bailout Funds". Business Insider. 19 August 2015. Retrieved 6 September 2015.