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Policy Contribution

The long haul: managing exit from financial assistance

Countries can make a clean exit from financial assistance, or enter a new programme or a precautionary programme, depending on the sustainability of their public debt and their vulnerability to shocks.

By: , and Date: February 20, 2014 European Macroeconomics & Governance Tags & Topics

Ireland made a clean exit in December 2013, supported by significant budgetary and current-account adjustment and signs of economic recovery. But Irish debt sustainability is not guaranteed and prudence will be needed to avoid future difficulties.

A clean exit for Portugal is not recommended when its programme ends in May 2014, because compared to Ireland it faces higher interest rates, has poorer growth prospects and has probably less ability to generate a consistently high primary surplus. A precautionary arrangement would be advisable. In case debt sustainability proves dif- ficult to achieve later, some form of debt restructuring may prove necessary.

It is unlikely that Greece will be able to exit its programme in December 2014. A third programme should be put in place to take Greece out of the market until 2030, accompanied by enhanced budgetary and structural reform commitments by Greece, a European boost to economic growth in the euro-area periphery and willingness on the part of lenders to reduce loan charges below their borrowing costs, should public debt levels prove unsustainable despite Greece meeting the loan conditions.

Even assuming all goes well, the three countries will be subject to enhanced post-pro- gramme surveillance for decades. Managing such long-term relationships will be a key challenge.

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Past Event

Past Event

Cyprus: Financing the Recovery

As Cyprus looks ahead to post-bailout growth, what lessons have been learnt from the crisis and subsequent bank restructuring?

Speakers: Sofronis Clerides, Harris Georgiades, David Green, Vincenzo Guzzo, Libor Krkoska, Michael S. Michael, Dirk Schoenmaker and Nicolas Véron Topic: European Macroeconomics & Governance Location: University of Cyprus, 1 University Avenue, Aglantzia Date: October 26, 2015
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Silvia Merler

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Primary surplus picked up in June, but July is the key month to watch.

By: Silvia Merler Topic: European Macroeconomics & Governance Date: July 16, 2015
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Marek Dabrowski

Five Lessons on Greece

A reflection on the experience of Greece and other countries who have implemented rescue programs

By: Marek Dabrowski Topic: European Macroeconomics & Governance Date: July 16, 2015
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Silvia Merler

Preserving the Greek financial sector: options for recap and assistance

Regaining the stability of the Greek financial sector is key, as a meltdown could lead to Grexit. The stability of the Greek financial system currently relies on the provision of ECB liquidity, which in turn is only available to solvent banks.

By: Silvia Merler Topic: European Macroeconomics & Governance Date: July 12, 2015
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Video

Video

The troika and financial assistance in the euro area

Bruegel launches a new video format to provide our audience with timely analysis anchored to some of the most topical economic news. In the first video of this series, Bruegel scholars evaluate the Troika’s financial assistance programmes in the eurozone. Director Guntram Wolff and Senior Fellows André Sapir and Zsolt Darvas answer how and when […]

By: Guntram B. Wolff, André Sapir and Zsolt Darvas Topic: European Macroeconomics & Governance Date: February 21, 2014
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External Publication

The Troika and financial assistance in the euro area: successes and failuresEuropean Parliament

The Troika and financial assistance in the euro area: successes and failures

This study was presented to the ECON committee of the European Parliament.It provides a systematic evaluation of financial assistance for Greece, Ireland, Portugal and Cyprus. All four programmes, and in particular the Greek one, are very large financially compared to previous international programmes.

By: André Sapir, Guntram B. Wolff, Carlos De Sousa and Alessio Terzi Topic: European Macroeconomics & Governance, European Parliament Date: February 19, 2014
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Parliamentary Testimony

empty_testimonyEuropean Parliament

Non-public testimony on the Troika's working and the effectiveness of financial assistance programs in the euro area.

By: André Sapir and Guntram B. Wolff Topic: European Macroeconomics & Governance, European Parliament Date: December 5, 2013
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Video

Video

Banking union and Greek bailout renegotiation

Interviewer: In Los Cabos, G20 leaders focused their response to Europe’s financial crisis on stabilizing banks and implement concrete steps towards a more integrated financial architecture that would also include common banking supervision and guarantees to repay bank depositors. What exactly does this mean? Jean Pisani-Ferry: What is striking in this G20 communiqué is the […]

By: Jean Pisani-Ferry Topic: European Macroeconomics & Governance Date: June 19, 2012
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Shahin Vallée

The Weekender: From the Spanish program to the banking union - Riga to Athens with love

Dear All, It has been a busy week with conference calls by G7 Minfins and eventually the eurogroup to hammer out an agreement for a Spain program. The release of the FSAP on Spain by the IMF on Friday somewhat conflicted with views of the Europeans (and in particular of the EFSF) suggesting that recapitalization needs would be greater than the 50bn announced. Europeans were already discussing then a larger package that would be more consistent with current market expectations. The ability to achieve a relatively high number has therefore created a largely positive surprise but although this is quite positive, the real questions remain unanswered. This week I will focus on: 1.    From the Spanish program to the banking union - 2.    Riga to Athens with love

By: Shahin Vallée Topic: European Macroeconomics & Governance Date: June 11, 2012