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Greece Gets Nearly $14.4 Billion to Pay E.C.B. and I.M.F. Greece Gets Nearly $14.4 Billion to Pay E.C.B. and I.M.F.
(about 2 hours later)
FRANKFURT — Greece received new aid from other eurozone countries on Thursday, allowing it to meet the deadline for a crucial payment to the European Central Bank and to narrowly avoid defaulting on its debt.FRANKFURT — Greece received new aid from other eurozone countries on Thursday, allowing it to meet the deadline for a crucial payment to the European Central Bank and to narrowly avoid defaulting on its debt.
The release of 13 billion euros, or nearly $14.4 billion, is part of €86 billion in new aid to Greece that cleared the last remaining political hurdles on Wednesday, including approval by the German Parliament. But most of the €86 billion in new aid will be used to repay existing debt rather than to rebuild the shattered Greek economy, leading to criticism that eurozone creditors are repeating the same austerity policies that delivered six years in a row of recession in Greece.
The European Stability Mechanism, the agency responsible for administering aid money on behalf of the 19 countries in the eurozone, said in a statement on Thursday that it had approved giving Greece €13 billion immediately in order to meet obligations to the central bank and the International Monetary Fund. The harsh terms that Greece must fulfill to qualify for the money have split the ruling left-wing Syriza party. Prime Minister Alexis Tsipras is now expected to call new elections for Sept. 20. While Mr. Tsipras is gambling that voters will give him a clear mandate, his decision could create political turmoil and hamper efforts to stabilize the economy.
The European Stability Mechanism, the agency responsible for administering aid money on behalf of the 19 countries in the eurozone, said in a statement on Thursday that it had approved giving Greece €13 billion, or nearly $14.4 billion, immediately in order to meet obligations to the central bank and the International Monetary Fund. The funds are part of €86 billion in new aid to Greece that cleared the last remaining political hurdles on Wednesday, including approval by the German Parliament.
Greece must pay €3.2 billion that is due on Thursday on government bonds held by the European Central Bank. Failure to pay would have put Greece into default and provoked another crisis.Greece must pay €3.2 billion that is due on Thursday on government bonds held by the European Central Bank. Failure to pay would have put Greece into default and provoked another crisis.
Most of the €86 billion in new aid will be used to repay existing debt rather than to rebuild the shattered Greek economy, leading to criticism that eurozone creditors are repeating the same austerity policies that delivered six years in a row of recession in Greece.
In order to qualify for the aid, Greece had to agree to maintain strict discipline while carrying out a long list of changes intended to improve the functioning of its economy.In order to qualify for the aid, Greece had to agree to maintain strict discipline while carrying out a long list of changes intended to improve the functioning of its economy.
But the Greek economy could benefit in the short term from receding fears that the country would default on its debt and be forced out of the eurozone. Investors may be more willing to risk money on Greece if they believe the country will remain a member of the bloc.But the Greek economy could benefit in the short term from receding fears that the country would default on its debt and be forced out of the eurozone. Investors may be more willing to risk money on Greece if they believe the country will remain a member of the bloc.
In addition, Greek citizens who drained their bank accounts may deposit the cash again if they are less worried that their euros will be converted into a new, weaker Greek currency. Depositors have withdrawn about €40 billion from Greek banks since December, pushing the government to put restrictions on cash withdrawals and money transfers abroad.In addition, Greek citizens who drained their bank accounts may deposit the cash again if they are less worried that their euros will be converted into a new, weaker Greek currency. Depositors have withdrawn about €40 billion from Greek banks since December, pushing the government to put restrictions on cash withdrawals and money transfers abroad.
“Today’s E.S.M. disbursement will allow Greece to meet its urgent financial obligations to the International Monetary Fund and the European Central Bank, and other budgetary needs,” Klaus Regling, the managing director of the European Stability Mechanism, said in a statement. “I am relieved that after intense negotiations with the Greek government and approval by our members, all conditions are now in place to make this disbursement in time.”“Today’s E.S.M. disbursement will allow Greece to meet its urgent financial obligations to the International Monetary Fund and the European Central Bank, and other budgetary needs,” Klaus Regling, the managing director of the European Stability Mechanism, said in a statement. “I am relieved that after intense negotiations with the Greek government and approval by our members, all conditions are now in place to make this disbursement in time.”
The board of directors of the European Stability Mechanism, which consists of finance ministers of eurozone countries, also approved €10 billion to help stabilize Greek banks. The money could further reassure depositors that the banks will not fail and encourage them to put cash back in their accounts. Greece must apply for the money first, however.The board of directors of the European Stability Mechanism, which consists of finance ministers of eurozone countries, also approved €10 billion to help stabilize Greek banks. The money could further reassure depositors that the banks will not fail and encourage them to put cash back in their accounts. Greece must apply for the money first, however.
There are already some tentative indications of pressure easing on the Greek banks, whose functioning is vital to the economy. This week, the European Central Bank lowered the amount of emergency cash it is making available to Greek banks by €700 million, to just under €90 billion.There are already some tentative indications of pressure easing on the Greek banks, whose functioning is vital to the economy. This week, the European Central Bank lowered the amount of emergency cash it is making available to Greek banks by €700 million, to just under €90 billion.
The reduction was considered a good sign. The Bank of Greece, the country’s central bank, requested less emergency funding because the lenders no longer need as much, according to a person with knowledge of the matter who spoke on the condition of anonymity because the information was considered confidential.The reduction was considered a good sign. The Bank of Greece, the country’s central bank, requested less emergency funding because the lenders no longer need as much, according to a person with knowledge of the matter who spoke on the condition of anonymity because the information was considered confidential.