Greece and Eurozone Creditors in Deal to Unlock $13 Billion

By NIKI KITSANTONISNOV. 17, 2015

The New York Times

ATHENS — Greece and its international creditors said on Tuesday that they had reached agreement on the country’s next round of economic changes, a deal that is meant to unlock as much as 12 billion euros, or about $13 billion, in loan money.

Athens had initially hoped the money would be dispensed after the Greek Parliament passed a package of economic measures last month.

But eurozone finance ministers said then that the steps did not fully meet the conditions required for the next milestone payment from the country’s €86 billion bailout package.

The breakthrough this time was a formula for providing some overly indebted homeowners protection from foreclosure, even as Greece and the creditors try to protect Greek banks from the worst effects of borrowers who cannot repay their loans.

“It was a difficult negotiation,” the Greek finance minister, Euclid Tsakalotos, told reporters in Athens, where he and other officials had thrashed out the terms with representatives of the eurozone creditors.

The next step is for the Greek Parliament to vote on the terms of the deal when lawmakers convene on Thursday.

The measure is expected to pass, because the governing coalition has a majority in the 300-seat Parliament.

Of the money, €2 billion would be spent on Greece’s domestic needs, while up to €10 billion would go toward recapitalizing the Greek banks — rebuilding their cash reserves to make them less vulnerable to risk.

In Brussels on Tuesday, the head of the eurozone finance ministers, Jeroen Dijsselbloem, hailed the “substantive agreement” as “good news.”

The European Union’s commissioner for economic and financial affairs, Pierre Moscovici, struck a similar tone. “I’m happy to confirm that the agreement has been reached on the main measures needed to complete the first set of milestones,” he said.

Thursday’s parliamentary vote will be the fourth in recent weeks on economic changes demanded by creditors. The previous three votes endorsed some but not all of the 48 economic overhauls demanded by lenders in exchange for releasing the next allotment of loan money.

Creditors’ demands for home foreclosures in the case of overly indebted mortgage-holders had been a sticking point in negotiations as the leftist-led government has argued that shielding Greek families from losing their homes was necessary to ensure social cohesion.

Under the agreement described on Tuesday, 25 percent of homeowners deemed to belong to “vulnerable social groups” would continue to be granted protection from foreclosures.

An additional 35 percent of homeowners are to be eligible for foreclosure protection based on a series of criteria, including their repayment record and the value of their property.

Bad loans are one of the biggest problems plaguing Greek banks, although nonperforming business loans are an even bigger burden for the institutions than home mortgages in arrears.

An assessment by the European Central Bank last month found that €14.4 billion would be required to address the problem of bad loans and enable the country’s four main banks to resume operating fully as lenders, helping to pump money into the ailing economy.

Since that assessment, Greek banks have sought private funding, which might limit the amount of bailout money they require.

The banks and their investors would rather limit the state’s involvement in the process, if they can.

Mr. Tsakalotos said on Tuesday that the bailout money set aside for the banks would be released once Greek banks had arranged that separate financing.

Issues still to be resolved in subsequent negotiations include determining which nonperforming bank loans can be sold to foreign investors, and whether home mortgages can be included.

James Kanter contributed reporting from Brussels.