ATHENS, Greece – Greece was formally cleared Monday to get the next batch of bailout loans due from its third financial rescue after the cash-strapped country implemented a series of economic reform measures that European creditors had demanded.
The country will get a 2 billion-euro ($2.1 billion) payment on Tuesday, money that will be used to meet debt service commitments, clear arrears and co-fund projects with the European Union.
The crippled Greek banks, which are reeling from limits on money transfers and another likely recession, can also soon start claiming money from a separate 10 billion-euro pot of money available.
The formal approval came after Greece’s parliament last week backed new austerity measures, including higher taxes on wine and road use as well as more limited protection for distressed mortgage holders. Opposition to the latest measures, however, cut the leftwing government’s majority in parliament from five seats to three.
The Greek government, led by Prime Minister Alexis Tsipras, still faces a laundry list of reforms to unlock further funds from the three-year bailout, which was agreed in the summer. Topping the next list is a further overhaul of the national pension system.
Jeroen Dijsselbloem, the eurozone’s top official told reporters in Brussels at the conclusion of a meeting of the bloc’s 19 finance ministers that the Greek government has indicated that it will be implement a second set of milestones by mid-December. Any delaying tactics, he said, would “cause a lot of unnecessary, unwanted concerns inside and outside Greece.”
Dijsselbloem also said the IMF was willing to extend its involvement in the Greek bailout. It’s been a partner since Greece first got bailed out in May 2010 but its current involvement ends early next year.
The IMF, he said, wants Greece to implement all the so-called milestones, including pension reforms, and more budget measures to make sure that the Greek budget remains on track.
The IMF has also indicated it wants Greece’s debt burden to be reduced and Dijsselbloem confirmed that discussions on that should pick up in earnest early next year.
Klaus Regling, the head of the European Stability Mechanism, the institution that actually pays out the bailout cash, indicated that the full 10 billion euros on offer for the banks won’t be needed and that in addition to a further 15 billion available that is not required, Greece’s bailout will be markedly below the 86 billion euros envisioned in the summer bailout agreement.
Healing the banks is perhaps the most pressing concern for Greece. The lenders remain badly hobbled by this year’s crisis, which put the country on the brink of falling out of the euro. They need cash quickly so they can start operating normally, a necessary condition for any modern economy.
The scale of the problems facing Greek banks is most evident in the fact that the government is still limiting cash withdrawals to a mere 60 euros a day, or 420 euros a week. The limits were imposed in late June to head off a bank run.
Greece is expected to slip back into a mild recession next year, according to the 2016 budget submitted to parliament last week, while the national debt is set to climb higher, reaching 188 per cent of annual economic output, or 327.6 billion euros ($347.6 billion).
Pan Pylas reported from London.