Euro ministers give blessing to Greek bailout, wooing IMF on debt

Greek Finance Minister Euclid Tsakalotos listens his French counterpart Michel Sapin (R) during a euro zone finance ministers meeting in Brussels, Belgium, 14 August, 2015 - REUTERS

Euro zone finance ministers have agreed to lend Greece up to 86 billion euros ($96 billion) after Greek lawmakers accepted their stiff conditions despite a revolt by supporters of leftist Prime Minister Alexis Tsipras.

Assuming approval by the German and other parliaments, 13 billion euros should be in Athens next Thursday to pay pressing bills and a further 10 billion will be set aside at the European Stability Mechanism, earmarked to bolster Greek banks’ capital.

In all, euro zone governments will lend 26 billion euros in a first tranche of the bailout before reviewing Greece’s compliance with their conditions in October.

One remaining uncertainty - aside from Tsipras’ ability to deliver sweeping budget cuts and privatisations opposed by many of his own party - is the role of the International Monetary Fund. After backing two previous bailouts, the IMF renewed its call for the Europeans to grant Athens debt relief - a bone of contention between the Eurogroup and the Washington-based Fund.

Managing Director Christine Lagarde told the Eurogroup by telephone that she could not commit until the IMF board reviewed the situation in the autumn. Officials said the Fund needed more assurances and detail on Greek reforms, notably to pensions, and steps to persuade it that Greece’s debt burden was sustainable.

But after deadlock since January that ravaged the already weak Greek economy and ended in a dramatic U-turn a month ago by the anti-austerity leftist government to avert Athens’ expulsion from the euro, there was a cautious sense of optimism among ministers gathered in a Brussels deep in summer holiday languor.

“After six months of very difficult negotiations with lots of ups and downs, we finally have an agreement,” Greek Finance Minister Euclid Tsakalotos told reporters on Friday. His appointment by Tsipras six weeks ago in place of his abrasive predecessor has been hailed by counterparts as a mark of a new Greek “realism”.

“After the changes in the government and the crises that we had, the cooperation with let’s say the changed Greek government is very constructive, very well organised,” Jeroen Dijsselbloem, the Dutch minister who chaired the meeting, told reporters.