Summary:EXECUTIVE SUMMARY
Extended Arrangement: On May 15, 2013, the Executive Board approved a three-year
Extended Arrangement under the Extended Fund Facility in the amount of SDR 891 million (563 percent
of quota; about €1 billion). Three purchases of amounts equivalent to SDR 74.25 million (about €86
million) each have been made so far, and another purchase of the same amount is proposed to be
released upon completion of the third review. The European Stability Mechanism has released €4.6
billion of €9 billion committed, with a disbursement of €150 million expected in early April.
Recent Economic Developments: While deep, the 2013 recession was not as severe as anticipated. The
adjustment is occurring through both quantities and prices, and signs of stabilization are emerging
in the banking sector. However, the outlook remains challenging, with rising unemployment, falling
credit, and increasing non-performing loans. In this context, growth projections remain unchanged,
with a deep contraction expected in 2014 and a modest and credit-less recovery taking hold in
mid-2015.
Policy Implementation: The program remains on track. Fiscal targets were met with considerable
margins, the coop sector was recapitalized, and additional relaxations of payment restrictions are
being implemented. Delays in the implementation of structural reforms have recently been overcome.
Looking forward, policies will need to focus on dealing with the high level of non-performing
loans, further normalizing payment flows, maintaining fiscal prudence, and stepping up the
implementation of the ambitious fiscal structural reform agenda. Risks to program implementation
remain significant, including due to remaining financial sector vulnerabilities and diminished
political support following the breakup of the governing coalition.
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