Greece has won an essential batch of bailout funds from international creditors following agreement among the 19 eurozone finance ministers and can start looking forward to debt relief in the future.
After the ministers approved Greece’s recent reform efforts, they decided early Wednesday to disburse 10.3 billion euros ($11.5 billion) in funds to see Athens through the next months.
The first disbursement of 7.5 billion euros ($8.4 billion) could already begin by the middle of next month with other disbursements coming after the summer, pending positive feedback from European institutions.
“We now have global agreement which opens the way for a significant disbursement of much needed funding for Greece and important measures on debt relief,” which will be progressively phased in, said EU Commissioner Pierre Moscovici.
The breakthrough came after 11 hours of tortuous talks instead of the easy approval which had originally been seen. But considering the bad blood between Athens and its creditors over the past years, Wednesday’s deal was seen as a major step forward.
“This opens the way for a return of confidence that is so essential for lasting economic recovery in Greece, which is our common purpose,” said Moscovici.
EU President Donald Tusk, who had been vital in staving off Greek bankruptcy last year, also looked at the future. He called the deal in a Twitter message “a Strong message of stability for Greece, Europe and the global economy.”
A representative of the International Monetary Fund welcomed the deal but said its board would still have to rule on its participation. The linking in of the IMF into the program was seen as essential.
Greece’s parliament passed a bill over the weekend on a series of measures that creditors had demanded. They included tax hikes, more budget-cutting reforms and a new privatization superfund, which will manage almost all state property.
The next step for creditors would be to find a way to lighten the country’s debt load, which mainly consists of past rescue loans from eurozone states. Greece’s debt is predicted to reach more than 333 billion euros ($379 billion) this year, around 180 percent of its annual economic output.
“Greece needs room to breathe, it needs certainty. It’s made considerable efforts, and again this weekend,” said French Finance Minister Michel Sapin, referring to the reforms Greece passed.
On the question of debt relief, Dijsselbloem said there was no appetite for any outright cut to the value of the money Greece owes.
Rather, the creditors are likely to examine a possible lowering in the interest rates and possibly an extension of the rescue loans’ maturity dates, as called for by the International Monetary Fund. There are fears the IMF may even pull out of the bailout program if Greece’s debt burden is not lightened.
“An actual haircut of the loans will not happen,” Dijsselboem said. “What we can look at is the annual debt burden, so Greece can on an annual basis pay its debts. If not, we are ready to help them in the coming years.”
Senior EU officials believe the plans being drawn up by experts to address Greece’s short, mid- and longer-term debt needs will be enough to keep the IMF on board.