Euro zone ministers approve first tranche of Greek bailout funds

A European Union flag (left) flies beside a Greek national flag in front of the Parthenon temple in Athens, Greece.
A European Union flag (left) flies beside a Greek national flag in front of the Parthenon temple in Athens, Greece. PHOTO: BLOOMBERG

LUXEMBOURG (AFP) - Euro zone finance ministers on Wednesday formally approved the first tranche of a new €86 billion (S$133 billion) bailout for Greece after parliaments in member states backed the rescue-for-reforms deal.

A source close to the matter said Greece will receive a sum of €23 billion that will allow Athens to make a loan repayment of €3.4 billion due on Thursday to the European Central Bank.

"The Board of Governors of the European Stability Mechanism approved today the ESM managing director's proposal for a financial assistance agreement with Greece," the board said in a statement.

The board comprises the finance ministers of the 19-country euro zone.

EU commissioner for the euro Valdis Dombrovskis tweeted that the green light for the first tranche could mark the start of a new era for Greece.

"Greek authorities have an opportunity to restore financial stability. Implementation of the reforms is what will count at the end," he wrote.

The key moment for the board occurred when the German parliament voted by an overwhelming majority Wednesday to back a third bailout for Greece, which the euro zone finance ministers had approved on Aug 14.

In a breakdown of the first tranche, €10 billion will be placed in a fund to recapitalise Greek banks while another €13 billion will be partly used to repay the loan to the ECB and a bridging loan of €7.16 billion, which the EU granted to Athens in July to allow it to honour previous commitments to the ECB and the IMF.

There remains €3 billion in the first tranche, which will be disbursed in September or October provided certain reforms are carried out, according to officials.

The bailout accord goes far beyond economic management to include an extensive overhaul of Greece's health and social welfare systems plus its business practices and public administration.

Seemingly small details of daily life will also be affected by the new rules, from visits to the doctor to an extension of the expiry dates on pasteurised milk in the supermarkets.