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Greece given half of bailout fund to ensure terms are met

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Greece's Finance Minister Evangelos Venizelos (L) talks with Ireland's Finance Minister Michael Noonan (R) at a Eurogroup meeting ahead of a two-day EU leaders summit in Brussels.

Greece's Finance Minister Evangelos Venizelos (L) talks with Ireland's Finance Minister Michael Noonan (R) at a Eurogroup meeting ahead of a two-day EU leaders summit in Brussels.

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EUROZONE member countries approved just half of the €130bn bailout for Greece saying that Athens has yet to prove that it will meet all the terms and conditions required for the second bailout.



The remaining €71.5bn will be paid once officials from the European Union and IMF are happy that Greece is committed to implementing key measures aimed at putting the country back on a sound economic footing.

Athens has passed laws on fiscal consolidation, pension reform, financial sector regulation and structural reforms. It still has to issue some decrees and other ministry decisions that will translate the laws into action.

However, eurozone finance ministers did sign off on funds to underpin the debt swap aimed at cutting the value of the Greek bonds held by private investors.

The money can be paid out only after the completion of a bond swap between Athens and private investors which is to be concluded by March 9 and which aims to halve Greece's privately-held debt, cutting it by €100bn.

Assessment

Jean-Claude Juncker, the Luxembourg prime minister who chairs the eurogroup, said Greece's official creditors would "finalise in the next few days" an assessment of Greece's steps to enshrine the bailout conditions into law.

"All required legislation by the parliament and the ministerial cabinet has been adopted and a few pending implementing acts should be completed shortly," Mr Juncker said in a statement.

The second financing programme for Greece, which follows a €110bn bailout agreed in May 2010, will total €130bn, plus €34.4bn of the undisbursed remainder of the first programme.

Heading into the finance ministers meeting, Finance Minister Michael Noonan said the meeting would largely focus on Greece. "There will be a review of the prior agreement and there will be a review of how far they have implemented the requirements. I understand they have implemented it in full, so that will be the nature of the report and then there will be a discussion."

The ministers also agreed on a backstop facility for the recapitalisation of Greek banks. No figures were given but two euro officials said €23bn out of the €130bn was earmarked for that purpose. Another official said it could be as much as €40bn.

In an important ruling, the trade body that regulates the credit default swap market yesterday ruled the bond insurance should not pay out because Greece is not yet in default.

Greek Finance Minister Evangelos Venizelos signed five agreements on the planned debt swap and other issues related to the €130bn bailout, sending what he said was "a message to the private sector, the markets and the international community that the official sector supports Greece in every aspect".

Greece has said it is not obliged to carry out the bond swap unless it gets 90pc participation. If participation is below 90pc but above 75pc, Greece would consult with public creditors.

To get the support of eurozone ministers for the bailout, the Greek parliament approved on Wednesday an extension of pharmacy opening hours and cuts to spending on drugs, the final significant element in a package of three dozen "prior actions" demanded.

Finance ministers are scheduled to meet again on Monday week. The first formal review of the second package will come three months after it is signed off, probably in June. There will also be a dedicated group of inspectors in Athens monitoring the government's every step.

Any slippage and the IMF, or the European Commission, or both, could decide that Greece is beyond assistance and leave it up to Athens to decide if a deeper debt restructuring or full default is necessary. (Additional reporting Reuters)

Irish Independent