ECONOMY

Europe reaches agreement on new rescue package for Greece

europe-reaches-agreement-on-new-rescue-package-for-greece

European governments agreed on a third aid package for Greece, signaling a determination to keep the country in the euro and setting aside doubts about its ability to repay its debts.

Finance ministers of the 19-nation eurozone endorsed a 86 billion-euro ($96 billion) loan program, following two packages worth 240 billion euros since 2010. The fresh money will be parceled out over three years as Greece enacts economic reforms.

By granting the aid, the German-led bloc of creditors threw their lot in with Greek Prime Minister Alexis Tsipras, who came to office in January vowing to roll back budget cuts, only to back down when threatened with ouster from the euro. A first test will be whether Tsipras forms a more stable government, possibly after new elections.

“There were differences but we have managed to solve the last issues,” Dutch Finance Minister Jeroen Dijsselbloem told reporters in Brussels late Friday after chairing the meeting. “It will allow the Greek economy to return to sustainable growth.”

Final approval in countries including Germany and the Netherlands hinges on parliamentary votes next week. While German Chancellor Angela Merkel’s coalition commands a comfortable majority in the Bundestag, the vote will be an opportunity for dissenters in her party to lodge symbolic objections to her crisis management.

Some 26 billion euros will be made available in the first disbursement, including 10 billion euros for a fund to recapitalize Greek banks, according to a Eurogroup statement. The rest will mainly be used to redeem a short-term loan that enabled Greece to make a payment to the European Central Bank in July and cover another 3.2 billion euros owed by Greece to the ECB on Aug. 20.

[Bloomberg]