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Eurozone creditors approve new rescue loans for Greece

Published 25/05/2016

Supporters of the communist-affiliated union PAME chant slogans during an anti-austerity rally in Athens (AP)
Supporters of the communist-affiliated union PAME chant slogans during an anti-austerity rally in Athens (AP)

Greece has won a new batch of rescue loans from international creditors following agreement among the 19 eurozone finance ministers.

After the ministers approved Greece's recent reform efforts, they decided to disburse 10.3 billion euro (£7.85 billion) in loans early on Wednesday to see Athens through the next months.

"We have a full agreement," said Eurogroup chief Jeroen Dijsselbloem.

The first payment of 7.5 billion euro (£5.7 billion) could be made by the middle of next month with other tranches spread over the summer, pending positive reaction 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," said EU Commissioner Pierre Moscovici.

The breakthrough came after 11 hours of tortuous talks instead of the easy approval which had originally been expected.

But considering the bad blood between Athens and its creditors over the past years, the 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 Mr Moscovici.

A representative of the International Monetary Fund welcomed the deal but said its board would still have to rule on its participation.

Greece's parliament passed a bill over the weekend on a series of measures that creditors had demanded. They included tax rises, more budget-cutting reforms and a new privatisation 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 euro (£251 billion) this year, around 180% 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, Mr 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 IMF.

There are fears the IMF may even pull out of the bailout programme if Greece's debt burden is not lightened.

"An actual haircut of the loans will not happen," Mr Dijsselbloem 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.

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