When the Fed pays off Greece’s debt – and now the US has to pay for it
New Delhi: The Federal Reserve is expected to pay off a $1.2 trillion debt that Greece defaulted on last year as part of a bailout package that was designed to keep it from collapsing into a financial abyss.
The agreement, reached on Thursday, will allow the United States to pay a portion of the debt to Greece, which had defaulted earlier this year, with a portion going to creditors.
The debt is being paid in cash, with no debt payments due until 2020.
The Federal Deposit Insurance Corp., which oversees the US financial system, said it expected the payment to be complete within two weeks.
The United States will now have the ability to pay back the debt with a payment of interest.
The European Union agreed to a similar deal last year.
The deal has caused a major rift between the United Kingdom and the United State, with the UK and US officials warning that the deal will lead to a potential downgrade of their sovereigns rating and an economic crash.
“The US and the EU are going to have to face the fact that the IMF is not going to do anything for Greece,” one senior US official said.
“They can’t even write a check to them.”
The European Commission is the lead agency for the euro, and on Thursday said it had been in contact with the Greek finance ministry.
“It is essential that the EU, the IMF and the ECB do everything possible to keep the financial markets safe from the consequences of Greece defaulting,” it said in a statement.
“We will do everything to ensure that the European Central Bank and other institutions remain safe and sound.”