The Greek delegation to the Eurogroup in Luxembourg was taken somewhat aback Monday after eurozone officials approved the disbursement of 1.1 billion euros instead of the full amount of 2.8 billion in loans Athens was banking on.
The Eurogroup acknowledged that Greece had implemented the 15 prior actions set out in the first review of its third bailout deal, allowing eurozone finance ministers to approve the disbursement of 1.1 billion euros under the European Stability Mechanism’s (ESM) second tranche. But it held back the remaining 1.7 billion, which will be used to pay state arrears to third parties.
Therefore, the disbursement of the full amount has been deferred to the Euro Working Group meeting on October 24-25.
In a statement, eurozone finance ministers said the remaining 1.7 bln euros will be released after Greece’s arrears payments to third parties are assessed.
The snag is linked to a decision by the Eurogroup last May, which stipulated that in order for the subtranche to be disbursed in full, Athens would have had to first absorb the first installment of 1.8 bln it received in June.
In other words, it had to pay state arrears to third parties in full before the tranche of 2.8 billion euros could be unlocked.
This information was not available to the Eurogroup Monday however, and, as a result it could not give the go ahead for the full amount.
According to Finance Minister Euclid Tsakalotos, more time was needed to assess whether state arrears had indeed been paid in full to third parties in September.
A senior European official said that the Greek side was trying until Saturday to get the relevant data but was ultimately unable to do so.
Nonetheless, Tsakalotos said that the meeting was conducted in a “a good climate” and the assessment that Greece had implemented all the prior actions was “a unanimous one,” as was apparent in the statement made by the Eurogroup.
“The Eurogroup welcomes the implementation by the Greek authorities of the set of 15 milestones in the context of the first review of the ESM program,” the statement said. It added that the implementation of these milestones has “paved the way for the ESM Board of Directors to approve the remaining disbursement of 1.1 bln euros under the second tranche for debt servicing needs.”
Pierre Moscovici, the European commissioner for Economic and Financial Affairs, struck a positive note, saying that “Greece is on the right track.”
Athens is eager to secure the funds and wrap up the second review of its third bailout as early as possible so as to kickstart talks on restructuring Greece’s debt by the end of the year – a key objective of the government.