The European Stability Mechanism (ESM) is providing Greece with billions of euros in fresh money after EU finance ministers finally agreed that the debt-laden country has made progress in bringing its finances in order.
The eurozone bailout fund, officially known as European Stability Mechanism (ESM), approved a disbursement of 7.5 billion euros ($8.4 billion) to Greece on Friday, saying the payment would be made in the course of next week.
Athens and its creditors had spent months negotiating reforms and cost-cutting measures that would allow money to continue flowing from Greece's third bailout program worth 86 billion euros.
Friday's ESM decision clears the way towards full payment of the second bailout tranche worth a total of 10.3 billion euros. Under the deal, Greece is expected to use 5.7 billion euros from that money to cover servicing of its existing debt. An additional 1.8 billion euros it is allowed to use as a means to support the real economy.
Disbursement of the remaining 2.8 billion euros would be made after the summer and once Athens had carried out further reforms in the banking and energy sectors as well as more progress in privatizations, the ESM said.
Step back from the brink
Debt-laden Greece urgently needs the fresh funding to pay back debt to the tune of more than 3 billion euros due in July. The finance ministers of the 18-country eurozone gave the green light to the disbursement during talks in Luxembourg on Thursday.
EU Economy Commissioner Pierre Moscovici said after the talks that the fresh money would provide "oxygen" for the Greek economy, adding that the country was "on the right track."
The Greek finance minister Euclid Tsakalotos, however, believes that his country still had a long way to go, saying: "The Greek people have suffered a great deal over the last five, six years and it's not obvious that the successes are in sight yet."
Greece, which has accumulated sovereign debt of more than 176 percent of its annual economic output, hopes to get further debt relief in addition to bailout money. In this effort, it is supported by the International Monetary Fund (IMF) which considers the country's debt burden to be unsustainably high.
Last month, eurozone finance ministers laid out a series of debt relief measures with a view to bringing the IMF back on board because the global crisis lender has refused to take part in the third Greek rescue so far.
IMF chief Christine Lagarde, who took part in the Luxembourg talks on Thursday, said she was "very encouraged" by the measures agreed between Greece and its European partners, including the EU Commission and the European Central Bank (ECB).
"For us to be engaged under a program, a debt operation would have to be assessed on the basis of a new debt sustainability analysis," she said, noting that additional reforms would have to take place first.
The Washington-based fund hopes to reach a decision on its involvement by the end of the year.
uhe/jd (dpa, ESM)