Greece Clears Hurdle Toward Another Round of Bailout Aid

Greek economic overhauls win approval from eurozone finance ministers; $3 billion more in aid coming

The Wall Street Journal

By VIKTORIA DENDRINOU
Oct. 10, 2016 2:03 p.m. ET


LUXEMBOURG—Greece has completed a set of key economic overhauls, eurozone finance ministers agreed Monday, marking the end of the first review of its fiscal bailout and clearing the way for disbursement of new loans to Athens.

The ministers, who were here for their monthly meeting, gave their blessing to €2.8 billion ($3.12 billion) in the next stage of financial aid, but they stopped short of signing off on it immediately. Instead, they said the country would receive the funds at the end of the month, when data on repayments Greece has made to domestic contractors should also be available.

While the next slice won’t be made immediately available, the fact that Greece’s creditors agreed that all the economic overhauls have been implemented essentially completes the lengthy first review of the country’s third bailout, which could amount to €86 billion



“These are good news,” said Jeroen Dijsselbloem, the Dutch finance minister who presided over the meeting. “We will now focus on the second review, which we expect to be completed swiftly.”

The tranche of aid will comprise €1.1 billion to be used for debt servicing, and €1.7 billion to repay arrears owed to domestic contractors.

The overhauls approved include changes to the energy sector, the pension system and the creation of a privatization fund that would be partly used to repay the country’s debt. The approval clears the way for negotiations to start on another review, which is expected to focus on such politically sensitive topics as labor market overhauls.

Experts from the institutions overseeing Greece’s bailout—representing the European Commission, the European Central Bank and the International Monetary Fund—are expected to head to Athens next week to resume negotiations with their Greek counterparts.

If discussions on the second review are completed by the end of the year, “we can have a global agreement including the question of the restructuring of Greek debt,” the EU’s economic affairs commissioner said on his way into the meeting.

But uncertainty over the IMF’s further participation in Greece’s bailout, which is meant to be decided by the end of the coming review, could weigh on any upcoming debt talks. Last week, the architect of Greece’s emergency bailout signaled the fund isn’t likely to soon rejoin Europe in more financing for the debt-worn country.

Speaking in Washington, Poul Thomsen, head of the IMF’s European department, reiterated the fund’s stance on the need for debt restructuring and called for further pension overhauls.

Since July 2015, Greece has relied on financing from the rest of the eurozone, whereas the IMF’s participation as a lender has been on ice because the fund believes Greece’s debt is not sustainable and requires large-scale relief. The fund argues that eurozone governments need to restructure their loans to Athens to ensure Greece’s solvency.

But several eurozone countries, led by Germany, have said they need the fund to sign on to Greece’s bailout before they can disburse more funds.

As for the talks here Monday, Greek Finance Minister Euclid Tsakalotos said it was a “very good” meeting for Greece, and that timing of the disbursement was not an issue as the country doesn’t face any imminent payments to its creditors.

Write to Viktoria Dendrinou at viktoria.dendrinou@wsj.com