The European Union finalized a 7.2 billion-euro ($7.8 billion) bridge loan to Greece that will help provide the debt-ravaged nation with a stop-gap until its full three-year bailout is settled.
“This agreement backed by 28 European Union member states prevents Greece from an immediate default,” Valdis Dombrovskis, EU Commission vice president for euro policy, told reporters in Brussels. The disbursement will reach Greece by Monday, he said.
The money will allow Greece to clear its arrears with the International Monetary Fund and the Bank of Greece and to repay the European Central Bank, according to an EU statement on Friday. Separately, the euro area’s finance ministries took the next step in approving the country’s main bailout of as much as 86 billion euros after national parliaments gave the go-ahead.
Greece needs the bridge financing to help it meet a repayment of 3.5 billion euros to the ECB on Monday and keep the country afloat while negotiations continue on the main bailout.
“What we are witnessing is European solidarity in action,” Dombrovskis said. “Those who say Europe lacks solidarity are mistaken; but solidarity comes with responsibility.”
The European Stability Mechanism, managed by the 19 euro-area nations, released a statement saying its board approved the decision to grant the main bailout “in principle.”
That step paves the way for the EU and IMF to negotiate with Greek authorities over the exact conditions the country will face in return for the loan program agreed by national leaders on Monday. Once that is finalized, euro-zone finance ministers and some national parliaments would again be called on to approve the accord before money could be released.
“I think there is enough time to reach agreement by the second half of August and I hope this is what we are going to do,” Dombrovskis said.
The new program will use only a small part of the firewall’s remaining 455 billion-euro capacity, said ESM managing director Klaus Regling in the statement. Regling has previously said the program will require about 50 billion euros in ESM borrowing.
The bridge loan will have a maximum maturity of three months and will be disbursed in as many as two installments, the EU said in its statement.
Some governments outside the euro area earlier expressed concern the bridge financing could have an impact on them because it’s coming from the European Financial Stabilization Mechanism, which involves all EU nations rather than just those in the single currency.
The exposure of the EU’s nine countries outside the euro “will be fully guaranteed by liquid collateral under legally binding arrangements,” according to the statement. “If Greece were unable to repay the loan in accordance with its terms, any liabilities incurred by non-euro area member states would be immediately reimbursed.”