March 13 (Bloomberg) -- Euro-area finance ministers signed off on a second Greek bailout, clearing the way for the first payment from the 130 billion-euro package ($170 billion) to be made this month.
“The new Greek program is not only in its starting blocks, but has been politically adopted tonight by the euro group,” Luxembourg Prime Minister Jean-Claude Juncker, who heads the group of 17 finance ministers, said in Brussels late yesterday. Euro finance officials will give a formal approval on March 14, a day before the International Monetary Fund board votes on its contribution.
Greece is now in line to receive more than 100 billion euros in the next three years from the European Financial Stability Facility, the euro region’s temporary rescue fund, starting with payments of 5.9 billion euros in March, 3.3 billion euros in April and 5.3 billion euros in May, EFSF Chief Executive Officer Klaus Regling said.
The agreement caps months of grueling negotiations between Greece, the IMF and euro-area authorities over the successor to an initial 2010 bailout that failed to halt the debt crisis. To win new the aid package, Greece had to sign on to deep budget cuts and complete the world’s largest-ever sovereign debt restructuring.
“The situation has changed for Greece today and this will have an effect on the economic life of the country,” Greek Finance Minister Evangelos Venizelos told reporters. Greece has “fundamental obligations” and must continue to implement its austerity program, he said, adding that elections in Greece won’t interrupt the pace of budget measures.
The debt swap wipes more than 100 billion euros off Greece’s books and includes the use of collective action clauses to compel investor participation. Euro finance ministers agreed on March 9 that Greece had met the terms for bailout funding and released 35.5 billion euros in payments and interest to bondholders.
As a result of the swap, Greece’s debt is on track to fall to 117 percent of gross domestic product by 2020, creating a buffer as the country strives to meet its commitments, Juncker said. Greece’s future in the euro area is assured “whatever will happen,” he said.
Next: Bank recapitalization