EU agrees to lend $96b to Greek bailout

The Pak Banker - - COMPANIES/BOSS -

Euro zone fi­nance min­is­ters have agreed to lend Greece up to 86 bil­lion eu­ros ($96 bil­lion) af­ter Greek law­mak­ers ac­cepted their stiff con­di­tions de­spite a re­volt by sup­port­ers of left­ist Prime Min­is­ter Alexis Tsipras.

As­sum­ing ap­proval by the Ger­man and other par­lia­ments, 13 bil­lion eu­ros should be in Athens next Thurs­day to pay press­ing bills and a fur­ther 10 bil­lion will be set aside at the Euro­pean Sta­bil­ity Mech­a­nism, ear­marked to bol­ster Greek banks' cap­i­tal.

In all, euro zone gov­ern­ments will lend 26 bil­lion eu­ros in a first tranche of the bailout be­fore re­view­ing Greece's com­pli­ance with their con­di­tions in Oc­to­ber.

One re­main­ing un­cer­tainty - aside from Tsipras' abil­ity to de­liver sweep­ing bud­get cuts and pri­va­ti­za­tions op­posed by many of his own party - is the role of the In­ter­na­tional Mon­e­tary Fund. Af­ter back­ing two pre­vi­ous bailouts, the IMF re­newed its call for the Euro­peans to grant Athens debt re­lief - a bone of con­tention be­tween the Eurogroup and the Wash­ing­ton­based Fund.

Ms. Chris­tine La­garde, Man­ag­ing Di­rec­tor of the In­ter­na­tional Mon­e­tary Fund (IMF), said, "the pol­icy pack­age spec­i­fied in the Mem­o­ran­dum of Un­der­stand­ing (MoU) re­cently agreed be­tween the Greek author­i­ties and Euro­pean in­sti­tu­tions, with in­put from Fund staff, is a very im­por­tant step for­ward. It not only re­v­erses much of the pol­icy back­track­ing that caused the pre­vi­ous pro­gram to run se­ri­ously off track, but puts in place wide-rang­ing poli­cies to re­store fis­cal sus­tain­abil­ity, fi­nan­cial sec­tor sta­bil­ity, and a re­turn to sus­tain­able growth. I par­tic­u­larly welcome the author­i­ties' ef­forts to over­come the se­ri­ous loss of con­fi­dence in re­cent months through strong up­front ac­tions. Most of these ac­tions have been fully spec­i­fied in the MoU, and key mea­sures in­clud­ing in the fis­cal struc­tural ar­eas will be im­ple­mented as prior ac­tions for the dis­burse­ment of the first Euro­pean Sta­bil­ity Mech­a­nism (ESM) tranche."

"In two ar­eas that are of crit­i­cal im­por­tance for Greece's abil­ity to re­turn to a sus­tain­able fis­cal and growth path-the spec­i­fi­ca­tion of re­main­ing para­met­ric fis­cal mea­sures, not least a size­able pack­age of pen­sion re­forms, needed to un­der­pin the pro­gram's still-am­bi­tious medi­umterm pri­mary sur­plus tar­get and ad­di­tional mea­sures to de­ci­sively im­prove con­fi­dence in the bank­ing sec­tor-the gov­ern­ment needs some more time to de­velop its pro­gram in more de­tail. This is un­der­stand­able, and I am en­cour­aged in this re­gard by the gov­ern­ment's com­mit­ment to work with its Euro­pean part­ners and the Fund on com­plet­ing these es­sen­tial re­forms in the com­ing months. With the de­tailed spec­i­fi­ca­tion of these out­stand­ing re­forms, the re­cently agreed MoU will en­tail a very decisive and cred­i­ble ef­fort on the part of the Greek author­i­ties to re­store ro­bust and sus­tain­able eco­nomic growth. How­ever, I re­main firmly of the view that Greece's debt has be­come un­sus­tain­able and that Greece can­not re­store debt sus­tain­abil­ity solely through ac­tions on its own. Thus, it is equally crit­i­cal for medium and long-term debt sus­tain­abil­ity that Greece's Euro­pean part­ners make con­crete com­mit­ments in the con­text of the first re­view of the ESM pro­gram to pro­vide sig­nif­i­cant debt re­lief, well be­yond what has been con­sid­ered so far.

"In con­clu­sion, I be­lieve that the ac­tions to be taken by the author­i­ties by the time of the first re­view, in con­junc­tion with the poli­cies spec­i­fied in the MoU, once they have been sup­ple­mented by the above-men­tioned fis­cal struc­tural and fi­nan­cial sec­tor re­forms, as well as by sig­nif­i­cant debt re­lief, will pro­vide the ba­sis for a cred­i­ble and com­pre­hen­sive pro­gram to re­store medium-term sus­tain­abil­ity. We look for­ward to work­ing closely with Greece and its Euro­pean part­ners in the com­ing months to put in place all the el­e­ments needed for me to rec­om­mend to the Fund's Ex­ec­u­tive Board to con­sider fur­ther fi­nan­cial sup­port for Greece." Of­fi­cials said the Fund needed more as­sur­ances and de­tail on Greek re­forms, no­tably to pen­sions, and steps to per­suade it that Greece's debt bur­den was sus­tain­able.

But af­ter dead­lock since Jan­uary that rav­aged the al­ready weak Greek econ­omy and ended in a dra­matic U-turn a month ago by the anti-aus­ter­ity left­ist gov­ern­ment to avert Athens' ex­pul­sion from the euro, there was a cau­tious sense of op­ti­mism among min­is­ters gath­ered in a Brus­sels deep in sum­mer hol­i­day lan­guor.

"Af­ter six months of very dif­fi­cult ne­go­ti­a­tions with lots of ups and downs, we fi­nally have an agree­ment," Greek Fi­nance Min­is­ter Eu­clid Tsakalo­tos told re­porters on Fri­day. His ap­point­ment by Tsipras six weeks ago in place of his abra­sive pre­de­ces­sor has been hailed by coun­ter­parts as a mark of a new Greek "re­al­ism".

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