Greece On Track to Get $2.1 Billion Aid Payment from Euro Area

  • Euro area moving toward deal if no objections on Saturday
  • Agreement in principle said reached on banks, details needed

Euro-area officials on Friday said Greece has met enough of its bailout requirements to unlock some of its rescue funds, paving the way for a 2 billion-euro ($2.1 billion) payment to go forward on Monday barring any last-minute objections.

QuickTake Greece’s Financial Odyssey

Finance ministry deputies meeting in Brussels reached broad agreement on releasing more aid and Saturday afternoon is the deadline for objections. After Friday’s Euro Working Group committee meeting, more details need to be clarified and the final deal will be communicated Saturday, said Michel Reijns, a spokesman for Eurogroup chief Jeroen Dijsselbloem, in a statement.

“The EWG reached a broad agreement on the completion of the measures included in the first set of milestones and on the financial-sector measures that are essential for a successful recapitalization process,” Reijns said.

The meeting reached an agreement in principle on moving forward with releasing funds for bank recapitalization, according to two euro-area officials familiar with the meeting. They spoke on condition of anonymity. The European Central Bank also delivered a positive report on the reviews conducted on Greece’s four biggest banks, and work will now continue on determining exactly how much aid each bank needs.

Raising Capital

In turn, investors are waiting for reassurance that the euro area will release the bank funds before they commit to their share of Greek bank capital raising. National Bank of Greece said Thursday it will allocate new shares raised in its offering once the euro area releases funds for recapitalizing Greece’s systemic banks.

Eurobank Ergasias SA and Alpha Bank AE also said in separate statements that they expect to allocate new shares to investors following confirmation from the Euro Working Group that the conditions for disbursement of 10 billion euros needed to recapitalize Greece’s systemic lenders have been satisfied.

Up to 10 billion euros in bank-related aid money can be disbursed once it’s clear how much is needed and after review by European Union competition authorities, who oversee state aid. Important conditions have been fulfilled, while questions remain on how they are dealing with non-performing loans, officials said.

Stress Tests

In response to German concerns about bad loans and the banking system, the ECB said it stood by the stress test results and the compromise Greece reached with the authorities on foreclosures and NPLs, two officials said. At the same time, the euro area was on track to retain control over the bank funds rather than turning over the full 10 billion euros to the Hellenic Financial Stability Fund, Greece’s bank recapitalization agency.

Greece has been making slow progress in tapping the 86 billion euros in the bailout that Prime Minister Alexis Tsipras secured in August. On Thursday, lawmakers passed legislation to ease restrictions on foreclosures and impose new taxes, including a levy on wine, winning more leeway from the euro area but also whittling down Tsipras’s already slim parliamentary majority.

The European Commission on Friday submitted a positive report on Greece’s compliance to the finance ministry deputies, who met under the auspices of the Euro Working Group. The euro area may issue a statement on Greece’s payment outlook as soon as Saturday, once the objection deadline passes. Finance ministers are scheduled to meet Monday in Brussels to discuss draft budgets and the may also include talks on Greece.