Finance ministers of the euro single currency group have approved the first €26bn of a vast new bailout package to help rebuild Greece’s economy
Jeroen Djisselbloem, chairman of the 19-nation Eurogroup, said that “of course there were differences but we have managed to solve the last issues”.
Some €10bn will be made available to recapitalise Greece’s banks while a second slice of 1€16bn will be paid in several instalments, starting with €13bn by August 20 when Greece must make a new debt payment to the European Central Bank.
“On this basis, Greece is and will irreversibly remain a member of the euro area,” European Commission President Jean-Claude Juncker said after the deal was sealed.
The final rescue package would eventually give Greece up to €86bn in loans over three years in exchange for harsh spending cuts and tax hikes.
The deal must still be approved by some national parliaments, including Germany, but that is largely considered to be a formality.
The move saves Greece from a disorderly default on its debts which could have come as soon as next week and helps to cement its membership of Europe’s single currency, but means more hardship for ordinary Greeks.
The approval came after Greece’s parliament passed painful reforms and spending cuts after a marathon overnight session that divided the governing party, raising the spectre of early elections.
The bailout bill passed through the Greek parliament thanks to support from opposition parties, with 222 votes in favour, 64 against, 11 abstentions and three absent in the 300-member parliament.
Although approved by a comfortable majority, the result was a blow to Prime Minister Alexis Tsipras, who saw more than 40 of his 149 radical-left Syriza party lawmakers vote against him.
He has come under intense criticism from party hardliners for capitulating to the creditors’ demands for budget cuts – austerity measures he had promised to oppose when he won the gerneral election in January.
The bill includes reforms increasing personal, company and shipping taxes, reducing some pensions, abolishing tax breaks for some groups considered vulnerable and implementing deep spending cuts, including to the armed forces.