Brussels, 17/07/2015 (Agence Europe) - Following the necessary go-ahead from a number of national parliaments, eurozone finance ministers gave their formal approval on Friday 17 July to the opening of negotiations for a third Greek bailout, negotiations that are expected to last a few weeks.
Germany's Bundestag voted by a wide majority (439 to 119) in favour of the agreement reached by the eurozone summit that paved the way, subject to conditions, for talks on a third three-year bailout programme from Greece, to be financed by the European Stability Mechanism (ESM) to the tune of €50 billion (see EUROPE 11358). In order to win over reluctant majority MPs, the German chancellor, Angela Merkel, said ahead of the vote that Greece deserved this opportunity and the alternative would be chaos. She paid tribute to the work done by German finance minister Wolfgang Schäuble, although he had called for a 'temporary Grexit.'
Following the vote at the Greek parliament on Wednesday accepting the prior actions required by Greece's lenders (see EUROPE 11360), Finland also gave the go-ahead on Thursday to a new aid plan for Greece.
Meeting on Friday as governors of the ESM, eurozone finance ministers gave their approval to the “decision to grant, in principle, stability support to Greece” the third such three-year bailout since 2010. They stated: “This in-principle decision paves the way for the institutions to negotiate a Memorandum of Understanding (MoU) detailing the agreed macroeconomic reforms, or policy conditionality, linked to the ESM financial assistance facility.”
Euro Commissioner Valdis Dombrovskis said the negotiations will last a few weeks and the aim was for them to be concluded in time for the ESM to release a €5 billion aid instalment that Greece needs to repay loan instalments to the ECB (€3.2 billion) and IMF (€1.25 billion) at the end of August. Representatives of Greece's lenders will travel to Athens to negotiate the terms of the bailout plan, which will include discussion of the country's debt, although he said a writedown is ruled out.
Default averted. That same day, the Ecofin Council formally decided to give Greece short-term aid of up to €7.16 billion (a loan with maximum maturity of three months and to be disbursed in up to two instalments) to allow Greece avoid defaulting on a repayment due on Monday 20 July. This bridging loan comes from the European Financial Stability Mechanism (EFSM), which is managed by the European Commission on behalf of the EU and has already been used to provide aid to Ireland and Portugal (see EUROPE 11361). “The loan will allow Greece to clear its arrears with the IMF and the Bank of Greece and to repay the ECB, until Greece starts receiving financing under a new programme from the European Stability Mechanism (ESM),” explains the Council of Ministers.
In order to win over non-eurozone countries, the loan from the EFSM will be guaranteed to ensure that non-eurozone countries do not lose a penny if the third Greek bailout goes wrong. The guarantee is two-pronged: - €1.84 billion in profits made in 2014 by central banks on Greek bonds bought under the ECBs SMP and ANFA programmes (the latter being an immediate guarantee for non-euro countries); and - some of the funds will come from the EU budget earmarked for Greece (a guarantee for the eurozone nations).
The European Commission says the remaining EFSM capacity will suffice to cover Athens' financing needs for the month of August if the third bailout talks are still ongoing at that point. (Mathieu Bion and Elodie Lamer)