Europe to turn on credit tap for Greece

With Greek banks are expected to reopen on Monday, Europe confirms €7B bridge loans to Greece, while European Central Bank raises emergency funding for Greek banks

Photo by: Reuters
Photo by: Reuters

Updated Jul 28, 2015

After the Greek Parliament approved a new bailout program proposed by eurozone finance ministers in order to unlock €86 billion, Europe resumed funding for the debt-stricken country on Thursday.

The European Central Bank (ECB) ended its almost three weeks long freeze and increased emergency funding to Greek Banks. It will provide €900 million ($980 million) of Emergency Liquidity Funding (ELA) over the coming week, which will allow the banks to reopen on July 20. However, in order to avoid a run on the banks on Monday, capital controls will remain in place.

Secondly, the European Union also approved €7 billion ($7.6 billion) in bridge loans to Greece which are needed for Athens to repay the ECB €3.5 billion of bonds plus roughly €700 million of interest on Monday.

While EU countries such as Britain and the Czech Republic are not part of the eurozone, all 28 of European Union countries are expected to contribute to the bridge loan. A compromise was decided upon involving using eurozone funds to guarantee these countries’ contributions to the loans.

Britain accepted the deal, which would protect any British money used in providing the loans, British Finance Minister George Osborne said.

Meanwhile, Finland, one of the countries most opposed to a third bailout for Greece, decided in favour of negotiating about the loans on Thursday. The loans are expected to be finalised on Friday with the approval of the German parliament.

One day before the critical vote, a test ballot was held in Germany. According to the results of the ballot, a majority of Germany’s conservative lawmakers approved restarting talks on a third Greek bailout.

TRTWorld and agencies