The Eurozone refers to the group of European Union (EU) countries that use the euro (€) as their national currency. The euro was introduced in 1999 as an accounting currency and in 2002 as physical currency in circulation. The Eurozone originally included 11 countries and has since expanded to 16 countries. Greece joined the Eurozone in 2000. Currently, the countries in the Eurozone include Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain. The EU has 27 member states. Denmark, Sweden, and the United Kingdom are members of the EU that have opted out of joining the Eurozone. All recent entrants to the EU, including Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, and Romania, are required to adopt the euro as their national currency as soon as possible, but must meet certain economic policy targets before they are eligible. Budgetary discipline is one of the criteria for joining the euro. Under the Treaty on European Union, commonly referred to as the Maastricht Treaty, EU member states are required to stay below a government budget deficit ceiling of 3% of GDP and external debt ceiling of 60% of GDP. Enforcement by EU authorities has been weak, however, and many governments have exceeded these ceilings. When the euro was introduced, some raised concerns about the viability of an economic union that has a common monetary policy but diverse national fiscal policies. The International Monetary Fund (IMF) is an international financial institution that was created after World War II to promote exchange rate and monetary stability. The founders aimed to avoid the beggar-thy-neighbor exchange rate policies and banking instability that deepened the Depression during the 1930s and the lack of any international mechanism for setting standards or coordinating policy. The IMF has changed over time as the world financial system has evolved. It now provides more technical assistance to member countries on banking and finance issues. However, its principal function is still one of lending money and encouraging reform to help countries deal with balance-of-payments and financial crises. The main concern is the possible contagion effects that might bring down other countries if a crisis in a specific country is not addressed. The IMF is owned by its member countries, whose votes are proportional to the amount of money they have subscribed to help fund its operations. The IMF funds its own internal budget from income earned through its lending program. The disbursements for IMF loans are generally conditional on the borrower country implementing reforms. Loans are generally disbursed in phases ("tranches") in order to encourage compliance with loan conditions. If conditions are not met, funds are not disbursed. The IMF charges its borrowers a rate of interest roughly equivalent to the price that major governments around the world pay to borrow funds, and it pays its member countries interest when it uses their quota resources to fund its loans. Disbursements for its regular loans, called Stand-By Arrangements (SBA), are repayable in five to eight years. Repayments for some of the IMF's more specialized programs may occur over a longer period of time. Until the mid-1970s, developed countries were frequent borrowers from the IMF. Since then, developing countries (particularly emerging markets) have been the principal borrowers. However, during the recent financial crisis, the IMF lent substantially to several of the newer members of the European Union (EU), and it has also assisted countries with advanced economies from time to time. Over the past decade, Greece borrowed heavily in international capital markets to fund government budget and trade deficits. High government spending, weak revenue collection, structural rigidities, and loss of competitiveness are typically cited as major factors behind Greece's accumulation of debt. Access to capital at low interest rates after adopting the euro and weak enforcement of EU rules concerning debt and deficit ceilings may also have played a role. Reliance on financing from international capital markets left Greece highly vulnerable to shifts in investor confidence. Investors became increasingly nervous in October 2009, when the newly elected Greek government nearly doubled the government 2009 budget deficit estimate. Over the next months, the government announced several austerity packages and had successful rounds of bond sales on international capital markets to raise needed funds. In late April 2010, when the European Union's (EU's) statistical agency, Eurostat, further revised the estimate of Greece's 2009 deficit upwards, Greek bond spreads spiked and two major credit rating agencies downgraded Greek bonds. Greece's debt crisis threatened to spread to other European countries, including Ireland, Italy, Portugal, and Spain, that may face fiscal challenges similar to Greece. The Greek government formally requested financial assistance from the 16 countries that use the euro as their national currency (the Eurozone) and the IMF on April 23, 2010. It was hoped that the financial assistance, combined with austerity measures, would prevent the Greek government from restructuring or defaulting on its debt or, more dramatically, from abandoning the euro in favor of a national currency. On May 2, 2010, the Eurozone member states and the IMF announced a three-year, €110 billion (about $145 billion) financial assistance package for Greece. This package takes the form of loans made at market-based interest rates. Figure 1 shows the sources of funds for the financial assistance package for Greece. Eurozone countries are to contribute €80 billion (about $105 billion) in bilateral loans. Each of the Eurozone countries (besides Greece) has pledged a bilateral loan, with the largest bilateral loans pledged by Germany and France (about $29.3 billion and $22 billion, respectively). The IMF is to contribute a €30 billion (about $40 billion) loan. Of the total, the IMF would draw half from IMF quota resources (the financial commitment countries make to the IMF upon joining) and half from bilateral lines of credit pledged by some member countries. It is worth noting that it is not clear how much of the €110 billion (about $145 billion) committed by the IMF and the Eurozone member states will be used by Greece. The money is disbursed in phases as Greece meets IMF loan conditions. If IMF officials say that Greece does not meet these conditions, IMF disbursements will not be made. Alternatively, if creditor confidence in Greece is restored and Greece can resume selling bonds on international capital markets at reasonable interest rates, the Greek government may not need to rely on Eurozone and IMF financial commitments. On the other hand, some economists have predicted that the financial package for Greece may not be sufficient to prevent Greece from restructuring its debt and/or exiting the Eurozone. The IMF loan to Greece is to be financed by two different sources of money. Half of the IMF loan to Greece (about $20 billion) will be financed by IMF quota resources. IMF quotas are the financial commitments that IMF members make upon joining the IMF and are broadly based on the IMF member's relative size in the world economy. The U.S. contribution to IMF quota resources is 17%. However, we cannot infer that 17% of the IMF loan financed by IMF quota resources (about $20 billion) is from the United States. Once the IMF Executive Board approves a specific loan, there is an administrative decision made by the IMF as to which countries' quotas will be tapped to fund that particular loan. The IMF does not disclose parties on individual transactions, but over time aims to provide a balanced position for all members. The other half (about $20 billion) of the IMF loan to Greece is expected to be financed by bilateral loans. These bilateral loans will become part of the IMF's supplemental fund, the New Arrangements to Borrow (NAB), when it becomes operational. They are available now, however, before the expanded NAB goes into effect. In 2009, the United States enacted legislation to extend a line of credit worth $100 billion as part of expanding the NAB. However, because the expanded NAB is not yet operational, this $100 billion line of credit from the United States cannot be tapped for Greece's package. The United States has never lost money on its commitment to the IMF. All U.S. financial interactions with the IMF are off-budget and, because of accounting factors, do not result in any net outlays or have any impact on the U.S. federal budget deficit. The IMF, like the other international financial institutions, enjoys a de facto preferred creditor status; member governments grant priority to repayment of their obligations to the IMF over other creditors. In the case of the Greece loan, IMF loans would be repaid prior to all other creditors. Financing from European countries will be junior to the IMF's loan and will have the same status as existing Greek debt. The IMF's membership as a whole bears any risk from lending to Greece, but, in its entire history, no member of the IMF has experienced a loss from providing resources to the IMF, either by lending to the IMF or through the payment of quota subscriptions. Furthermore, member countries whose quota resources are chosen for a specific IMF loan have a claim on the IMF's balance sheet as a whole. Thus, even if U.S. quota is drawn for the Greece loan, which may be likely, any associated risk to the IMF's balance sheet due to the IMF loan to Greece would be shared by all IMF members. The IMF has preferred creditor status, which means that the IMF, along with other international financial institutions, is first in line to get repaid by the member country, ahead of other creditors. Occasionally countries fall into arrears with the IMF, but no member country has lost money as a result. The IMF does not disburse the full amount of its loans to governments at once.