Greek Bailout Moves Ahead After Germany Gives Its Backing

The bailout of Greece took several big strides forward Friday after German lawmakers overwhelmingly gave their backing to another financial rescue and the European Union confirmed it would get Athens enough money to avoid an imminent debt default.

The developments, which capped a week in which Greece has cleared a string of hurdles, prompted a positive assessment from Europe's bailout fund. In a statement, the European Stability Mechanism said its board of governors approved a "decision to grant, in principle, stability support to Greece in the form of a loan program."

Though the broad outlines of the Greek bailout were agreed Monday by the eurozone's 19 leaders, the ESM's decision formally kick-starts the process by which Greece negotiates the nitty-gritty of its bailout program. The discussions, which are expected to last four weeks, will include economic targets and reforms deemed necessary in return for an anticipated 85 billion euros ($93 billion) over three years.

"This agreement offers a chance to put the Greek economy back on track," said Jeroen Dijsselbloem, the eurozone's top official who also chairs the ESM board. "It's not going to be easy. We are certain to encounter problems in the years to come. But I believe we will be able to resolve them."

The ease with which the pieces have fallen into place this week has raised expectations that Greece will get back to some sort of economic normality following weeks of crisis that have seen its banks shuttered and withdrawals at ATMs limited to a paltry 60 euros a day.

The first big development Friday was the news that German lawmakers, in the wake of their Austrian counterparts, voted 439-119 in favor of opening detailed discussions on the bailout package, after Chancellor Angela Merkel warned that Greece would face chaos without a deal.

That was later followed by confirmation that the 28-country EU is to get Greece 7.16 billion ($7.7 billion) in short-term cash by Monday, when it has a 4.2 billion-euro debt repayment due to the European Central Bank.

The funds, which will come from a long-dormant EU program called the European Financial Stabilization Mechanism, will also help Greece clear arrears with the International Monetary Fund, and with the Bank of Greece.

The loan, which will be for three months and disbursed over two instalments, comes a day after the ECB raised emergency liquidity assistance to Greek banks.

"What we're witnessing is European solidarity in action," said Valdis Dombrovskis, the EU Commission's vice president for the euro.

"Politicians across 27 countries have invested their own political capital to speed through national decisions to shoulder Greece at this difficult time for the country," he added.

Germany is likely to continue playing a key role in Greece's future as it is the largest single bailout contributor. It's taken a hard line, insisting on stringent spending cuts, tax hikes and wide-ranging economic reforms in return.

"The principle ... of responsibility and solidarity that has guided us since the beginning of the European debt crisis marks the entire result from Monday," Merkel told the special session of Parliament. The alternative to an agreement, she added, "would not be a time-out from the euro that would be orderly ... but predictable chaos."

Merkel will have to return to Parliament to seek approval for the final deal when the negotiations are concluded.

Page
  • 1
  • |
  • 2
Join the Discussion
blog comments powered by Disqus
 
You Might Also Like...