March 14 (Bloomberg) -- Euro-area member states gave formal approval to a second Greek bailout program, freeing a first installment of 39.4 billion euros ($51.5 billion) of aid.
The European Financial Stability Facility, the euro region’s temporary rescue fund, has been authorized to disburse the first payment in several tranches, Luxembourg Prime Minister Jean-Claude Juncker, who leads the group of 17 euro-area finance ministers, said in a statement today.
“This second program constitutes a unique opportunity for Greece that should not be missed,” Juncker said. “The Greek authorities should therefore continue demonstrating strong commitment and to keep up the implementation momentum by rigorously pursuing the adjustment effort in the areas of fiscal consolidation, structural reforms and privatization, strictly in line with the new program.”
The 130 billion-euro package received political approval earlier this week from the euro ministers at a meeting in Brussels. The International Monetary Fund’s board is set to vote on its participation tomorrow in Washington. IMF Managing Director Christine Lagarde has proposed a 28 billion-euro contribution, the IMF said on March 12.
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 the new 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,” Finance Minister Evangelos Venizelos said after the ministerial meeting. 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.
Greece is now in line to receive more than 100 billion euros in the next three years, starting with payments of 5.9 billion euros in March, 3.3 billion euros in April and 5.3 billion euros in May, according to EFSF Chief Executive Officer Klaus Regling.
The EFSF expects to disburse 48 billion euros on a non-cash basis for Greece’s bank-recapitalization efforts. Venizelos said he expects his nation to receive a 25 billion-euro first tranche of bank-sector funds soon.
The rest of the funds headed for Greece will be raised from financial markets, Regling said.
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