Eurogroup agrees release of next loan tranche for Greece [update]
By Nick Malkoutzis
BRUSSELS - Eurozone finance ministers agreed in Brussels on Thursday to immediately disburse 34.3 billion euros in bailout funds for Greece.
Of this, 16 billion euros will go towards bank recapitalization, 7 billion for budgetary financing and 11.3 billion to finance Greece's bond buyback program, which was completed this week.
European Union Economic and Monetary Affairs Commissioner Olli Rehn said that the decision was a definitive response to those who believed Greece would leave the euro.
“The Cassandras have been proved wrong,” he said. “They have been proved wrong by the commitment shown by Greece and the eurozone.”
The Eurogroup’s decision came after Greece completed a bond buyback of its government debt, worth just over 31 billion euros and which will lead to public debt being reduced by more than 20 billion euros.
The International Monetary Fund had insisted on the scheme as part of program to put Greek debt on a sustainable path, which would see it reach 124 percent of GDP by 2020.
The Fund threatened to withdraw further funding if the buyback was not successful.
IMF managing director Christine Lagarde took part in Thursday’s talks via teleconference.
Eurogroup chief Jean-Claude Juncker insisted that the IMF would stay on board with the Greek program even though the cost of the buyback was 1.2 billion euros higher than expected and would reduce debt by 9.5 percent rather than 11 percent of GDP.
“The IMF will take part in the program,” Juncker said at a news conference. He added that it “was not certain” that additional measures would be needed to bring Greece’s debt down to 124 percent by 2020.
Rehn pointed towards changes in co-financing rules for EU structural funds could bridge the gap. He said the calculations would be made early next year.
As a result of Thursday’s decision, which also came after Greece agreed to a new round of austerity measures and structural reforms, Athens will receive a total of 49.1 billion euros by the end of the first quarter of 2013.
“The disbursement will be made in several tranches,” the Eurogroup said in a statement. “34.3 billion euros will be paid out to Greece in the following days. The remaining amount will be disbursed in the first quarter of 2013. First, a further amount to cover bank recapitalization and resolution costs will be paid out in January. Second, funds to cover budgetary financing will be disbursed in three sub-tranches, linked to implementation of specific memorandum of understanding (MoU) milestones to be agreed by the troika.”
“The disbursement today will allow liquidity to return to Greece,” said Rehn. “It will be essential to retain the tempo of reforms in Greece in the coming months, including tax reform and the fight against tax evasion.”
Prime Minister Antonis Samaras and Finance Minister Yannis Stournaras are due to hold a news conference in Brussels on Thursday afternoon to assess the Eurogroup’s decision.
LINK: Exclusive Olli Rehn interview to Kathimerini journalist Nikos Chrysoloras immediately after the Eurogroup meeting.