Euro-area finance ministers reapproved a 5.8 billion-euro ($7.7 billion) loan to Greece under last year?s bailout after eliciting budget-austerity pledges from Greek political leaders backing a unity government, a European official said on Tuesday evening.
The go-ahead for the sixth disbursement of funds under the fully taxpayer-funded package of 110 billion euros shifts the spotlight to a second rescue of Greece that foresees 50 percent losses for private investors in Greek bonds. The new aid plan, crafted at an October summit, also includes 130 billion euros in extra public funds.
After initially endorsing the next loan for Greece on October 21, the euro area froze the payment early this month because former Socialist Premier George Papandreou called a surprise referendum on the rescue plan. He later called off the vote, resigned and was succeeded by ex-central banker Lucas Papademos, whose interim government has the support of three parties to press ahead with budget cuts needed for continued aid.
Greece, which faces a fifth year of economic contraction in 2012, says it needs the next international aid payment by mid- December. The euro area?s installment is part of an 8-billion-euro disbursement, of which the International Monetary Fund will provide the remainder.
The IMF, which is funding almost a third of last year?s package for Greece, must still approve its 2.2 billion-euro share of the next payment to the country. (Bloomberg)