Greece receives 10.3 billion euros in bailout loans

The 11 hours of talks, which lasted late into the night, also addressed debt relief. The debt relief measures will be phased in progressively, Eurogroup chief Jeroen Dijsselbloem said.

The International Monetary Fund has advocated for some debt relief, arguing Greece’s public debt was unsustainble. But some eurozone finance ministers and Germany have resisted debt relief. Crucially, the debt relief agreement will keep the Fund in the Greek bailout program.
Athens and its creditors have been haggling over reforms and budget cuts for months in order to reach an agreement on the next tranche of money to be released from Greece’s third 86-billion-euro bailout.
In July, Greece is due to repay 3.5 billion euros in loans to the European Central Bank (ECB) and the International Monetary Fund (IMF). Funds are also needed to prop up everyday government spending and public sector wages.
The new loans, the latest payment from the 86-billion-euro bailout program agreed to last year, would be conditional on Greece delivering on its reform promises. Greece has been receiving financial aid from other eurozone countries and the IMF since a bailout agreement in 2010.

Eurozone finance ministers and the IMF agreed to a range of measures to restructure Greece’s debts when its €86bn bailout ends in 2018 — but put no figures on the concessions and left them subject to political decisions by eurozone countries. Most significant decisions would be taken after the German federal elections next year.
One of the debt relief options involves dramatically reducing the IMF’s exposure to the Greek programme by buying out up to €14.6bn of its loans. For now, the IMF said it would participate financially in the programme at some stage later this year — a crucial demand for Germany — but only if the eurozone committed to a scale of relief that meets the fund’s normal lending guidelines.

“We have achieved a major breakthrough on Greece which enables us to enter a new phase in the Greek financial assistance programme,” said Jeroen Dijsselbloem, president of the eurogroup.
While still a work in progress, the outline deal allows the eurozone to extend €10.3bn in rescue loans to keep Greece afloat this summer, beginning with a €7.5bn cash release next month. The loan is the first injection of bailout funds since the end of 2015 and is expected to see Greece through to at least October.

The measures will be the first time Athens will be afforded debt relief by its official-sector creditors since November 2012.
The package included short, medium and long-term debt relief aiming to ensure Athens’ debt financing costs do not exceed 15 per cent of national income until 2030, and 20 per cent after that.
Before 2018, the European Stability Mechanism, the eurozone’s bailout fund, will rearrange its loan book to Greece with the aim of smoothing its payment profile and reducing interest-rate risk.
A set of more ambitious measures are scheduled for 2018, if Greece completes its bailout programme. These include the return of €1.8bn of profits of Greek bonds held by the European Central Bank, possible extensions of maturities and, if necessary, the buyout of relatively expensive loans to Greece, either from the IMF or in the form of bilateral loans from member states.

All the options will be subject to political approval by the eurozone, meaning none of these measures automatically applies once Greece exits its programme — a longstanding demand of the IMF.
Poul Thomsen, the IMF’s Europe chief, said he had made an “important concession” during talks over the trigger for the debt relief. “We have all shown flexibility”, the WSJ reports.
“This is a very important moment in a long and sometimes difficult story”, said Pierre Moscovici, EU commissioner for economic affairs.

But an deal on how to reduce the country’s debt burden, a condition the IMF has insisted on if it is to provide any further financial support for Greece, had remained a sticking point at Tuesday’s meeting with talks continuing well past midnight. Some speculated that the IMF may even have pulled out of the bailout program if Greece’s debt burden wasn’t cut, though IMF head Christine Lagarde said last month the institution had no intention of doing so.

Lagarde wasn’t present at Tuesday’s talks, leading some to speculate that a deal would not be reached. Going into the talks, Eurogroup head Jeroen Dijsselbloem stressed that “there is a real added value to have the IMF on board. It’s not an option to go on without the IMF.”
“There is a reason to look at debt relief because the debt is very high and there will be some problems in the future, I think the debt analysis shows that,” Dijsselbloem said. But, he added, “an actual haircut of the loans will not happen. What we can look at is the annual debt burden, so Greece can on an annual basis pay its debts. If not, we are ready to help them in the coming years.”