Euro zone finance ministers have agreed to disburse a further $17.41 billion (12 billion euros) to Greece, with the final details of an additional aid package to be worked out in the coming weeks.
The 17 euro zone ministers decided over a conference call on Saturday that the fifth tranche of Greece’s $159.6 billion (110 billion euro) bailout will be paid out by July 15, pending International Monetary Fund (IMF) approval.
The IMF is due to meet on July 8 to discuss the bailout.
“The Greek authorities provided a strong commitment to adhere to the agreed fiscal adjustment path and to the growth-enhancing structural reform agenda,” Jean-Claude Juncker, the chairman of the Eurogroup, said in a statement approving the release of the next aid payment.
“Ministers call on all political parties in Greece to support the programme’s main objectives and key policy measures in order to ensure a rigorous and swift implementation.”
Evangelos Venizelos, the Greek finance minister, welcomed the announcement, saying it “strengthened the country’s international credibility”.
“What is crucial now is the timely and effective implementation of the decisions taken in parliament, so we can gradually emerge from the crisis in the interest of national economy and the Greek citizens,” he added.
Private sector involvement
According to the statement, the “precise modalities and scale” of private sector involvement in the second aid package will be determined in the “coming weeks”, after further consultations.
The second aid package is also expected to amount to $159.6 billion (110 billion euros), but likely will not be finalised until September.
The $17.41 billion payment agreed to on Saturday will allow Greece to pay a bond redemption of $8.56 billion (5.9 billion euros) in August, though it will still face massive debt difficulties, with a debt-to-GDP ratio of over 150 per cent.
Greece has repeatedly failed to meet budget targets laid out in the first bailout programme, with the result that there is now a risk that the crisis will spread across the euro zone if matters continue as they have.
The second financing programme will run from 2011 to 2014, and comes in addition to an existing assistance package.
As part of the package, Greece is expected to raise about $45.53 billion (30 billion euros) from privatisation, the European Union and IMF to contribute around $72.56 billion (50 billion euros) and the private sector to provide about $45.53 billion (30 billion euros) through the rollover of debt.
“The precise modalities and scale of private sector involvement and additional funding from official sources will be determined in the coming weeks so as to ensure that … required programme funding is in place,” Juncker’s statement read.
On Friday, the influential Institute of International Finance (IIF), which represents banks, insurers and investment funds, approved of the prliminary plan for private sector involvement.
“Ministers agreed that the main parameters of a multi-year adjustment programme for Greece will revolve around a continued strong commitment to implementing fiscal consolidation measures… and concrete structural reform and privatisation,” Juncker’s statement went on to say.
European leaders committed to the second programme at their last summit on June 23-24, which satisfies an IMF stipulation that the euro zone must finance Greece 12 months ahead for the IMF to contribute.
Though the next tranche payment has been approved, there is growing concern among EU officials that the strictures being imposed on Greece, including a $40.63 billion austerity package between now and 2015 could cause longer term damage.
The finance minister for Poland, which has just taken over the EU’s six-month rotating presidency, suggested on Saturday that there is too much emphasis on austerity and not enough on Greek economic growth.
“We can’t afford to relax and we need to move forward as fast as possible,
both on the eurozone and IMF side,” Jacek Rostowski, the Polish finance minister, said.
He stressed that “mistakes” had been made in the past.
“It’s clear that everybody has made mistakes over the past year and a half,” he said. “We’ve all been behind the curve.
“The International Monetary Fund has a huge amount of experience in how to run [rescue programmes]. There are lots of things still that we can learn from the way the IMF does things,” he said, without mentioning specifics.