Eurogroup approves third bailout for debt-ridden Greece

John Thys, AFP | Dutch Finance Minister Jeroen Dijsselbloem, who is also president of the Eurogroup, pictured on June 22 in Brussels
4 min

Eurozone finance ministers agreed on Friday to approve a third bailout programme for Greece, with the first tranche of aid to be worth €26 billion.


Eurogroup chairman Jeroen Djisselbloem said that "of course there were differences, but we have managed to solve the last issues."

To recapitalise Greek banks €10 billion will be made available, while a second tranche of €16 billion will be paid out in several installments, starting with a €13 billion installment by August 20 when Greece must make a new debt payment to the European Central Bank (ECB).

"On this basis, Greece is and will irreversibly remain a member of the Euro area," said European Commission President Jean-Claude Juncker after the deal was sealed.

The meeting ended after some six hours of talks following the endorsement of the loan conditions by the Athens parliament. The Eurogroup talks opened in Brussels just hours after Greek lawmakers capped a bitter all-night debate by voting for the rescue plan, which is worth €85 billion ($95 billion) over three years and was agreed in return for tough and wide-sweeping reforms.

Greece and its creditors – the EU, ECB and International Monetary Fund (IMF) – were under pressure to finalise the deal before the August 20 ECB payment deadline.

Dijsselbloem said as he arrived for the meeting that "debt sustainability is still a major point of concern", adding that it would be "very important" for the IMF and Europe to agree on how to tackle the issue.

The IMF is reluctant to take part in the new rescue package unless the Europeans can agree on some form of relief for Greece's debt mountain – equivalent to 170 percent of GDP – to bring it down to a sustainable level.

Germany is adamant the IMF must be part of the deal but is also hostile to prospects of a partial writedown that could potentially cost it, and other holders of Greek debt, billions of euros.

Tsipras struggles to gain support of Greek MPs

Rebellion on the left

A third of MPs in Tsipras's radical-left party Syriza rebelled against him in the Friday vote on the deal, and he only managed to push through an approval with the help of the opposition – raising fresh speculation he will be forced to call early elections.

Syriza swept to power in January on a wave of popular anger against the austerity demanded by international creditors in exchange for two previous bailouts worth €240 billion.

Critics say the painful reforms have strangled the Greek economy, which only emerged from six years of brutal recession in 2014.

By backing a deal that involves more tough reforms, Tsipras has faced widespread accusations from within his party that he has abandoned his principles and capitulated to blackmail from Greece's creditors.

Their demands go far beyond better economic management to include an extensive overhaul of Greece's health and social welfare systems. Seemingly small details of daily life will be affected by the new rules, from visits to the doctor to an extension of the expiry dates on pasteurised milk in the supermarkets.

But Tsipras told parliament that his government has "taken on the responsibility to continue the fight, rather than commit suicide and then go running to other international forums saying it wasn't fair that we had to kill ourselves".

In addition to a green light from the eurozone, the deal will need to clear numerous other political hurdles before it moves ahead, including votes in several European parliaments.

The German parliament is set to vote on the deal on Wednesday, in a key test for Chancellor Angela Merkel. Sixty-eight lawmakers from her conservative camp voted against opening negotiations on a third bailout last month, and even more may do so next week if the IMF refuses to participate in the rescue plan.

Finland became the first eurozone member to endorse the deal on Thursday, albeit with conditions.

(FRANCE 24 with AP and REUTERS)

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