Eurozone Finance Ministers Approve Greek Bailout

BRUSSELS — Eurozone finance ministers on Friday backed a Greek bailout plan approved earlier in the day by lawmakers in Athens, overcoming months of bitterness.

The finance ministers ended lengthy talks in Brussels after finessing the final elements of the deal, which grants Greece as much as 86 billion euros, or about $95 billion, during the next three years.

The sticking points had included the role of the International Monetary Fund and the possibility of reducing Greece’s debt-repayment burden and the process for recapitalizing the country’s banks.

“The past six months have been difficult,” Jean-Claude Juncker, the president of the European Commission, the European Union executive body that helped broker the deal, said in a statement. “Together, we have looked into the abyss. But today, I am glad to say that all sides have respected their commitments.”

In a statement, the managing director of the I.M.F., Christine Lagarde, said the agreement in Brussels “reverses much of the policy backtracking that caused the previous program to run seriously off track.”

But Ms. Lagarde said the fund was not yet in a position to lend more money to Greece. She called on Greece’s European partners to “make concrete commitments” during a coming review of whether Greece was sticking to its promises and targets “to provide significant debt relief, well beyond what has been considered so far.” Only then would the fund’s executive board “consider further financial support for Greece,” she said.

The I.M.F. was not directly represented at the meeting in Brussels on Friday but took part by conference call, eurozone officials said.

The agreement will allow a first disbursement of €13 billion from the European Stability Mechanism, the eurozone bailout fund, to Greece on Thursday, said Klaus Regling, the fund’s managing director.

That will allow Greece to repay €3.2 billion to the European Central Bank by Thursday to avoid a debt default.

More important, the decision also offers the country a longer-term approach to financing its staggering debt, which now exceeds €315 billion.

Among the elements decided during the talks on Friday was to accelerate the establishment of a fund to manage the proceeds from the privatization of Greek state assets, and rules by which Greek banks should be recapitalized. While losses would be forced on some creditors of Greek banks, there would be no losses for any depositors, said Jeroen Dijsselbloem, the head of the European finance ministers, known collectively as the Eurogroup.

At a news conference here Friday night, Mr. Dijsselbloem acknowledged that the I.M.F. was not yet ready to contribute financially but said it was “very important that the I.M.F. comes back on board, so to speak.”

Mr. Dijsselbloem said the financial participation of the fund would be decided only in October. But he sought to emphasize that eurozone lenders understood the resistance by the I.M.F., and that the Eurogroup would do more to take its concerns into account.

“We should look at debt service as a principle” and ask whether “in economic terms Greece can — over the next, let’s say, 30 years — service its debt,” Mr. Dijsselbloem said. The eurogroup “took a step forward by having an agreement on the method,” he said.

A key question was whether Germany has enough confidence that Greece will stick to the terms of the three-year package and that the I.M.F. will commit its own finances to that plan.

The German Parliament and some others among eurozone countries still need to vote on whether to approve the plan.

Germany is the biggest lender to Athens among the 19 eurozone countries, and German taxpayers are wary of channeling new money to Greece, which has already received two bailouts worth more than €240 billion since 2010.

Valdis Dombrovskis, a vice president of the European Commission who is in charge of the euro, said at the news conference Friday that national approvals should be completed by Wednesday, allowing Athens to make the payment due the next day.

The finance ministers’ discussions took place in the face of new signs that Prime Minister Alexis Tsipras of Greece has lost the support of his own leftist Syriza party.

In recent weeks, Mr. Tsipras agreed to measures he had long resisted, including tax increases and cuts in government spending

Officials in Brussels point to significant improvements in relations with Athens since the replacement of Yanis Varoufakis, a confrontational leftist academic, with the comparatively cooperative Euclid Tsakalotos, as the country’s finance minister.

The accord requires Greece to impose strict spending limits, enact new tax increases and carry out sweeping changes in the way it manages its economy.

Even with those details in place, the European Commission has been fighting the perception that — along with the European Central Bank and the I.M.F. — it rushed the bailout plan for Greece this week.

Critics in Germany also say that the deal does not do enough to guarantee the transformation of the Greek economy or to ensure that money from the privatization of Greek state-owned assets like ports and airports is used primarily to pay down the country’s debt.

“Germany isn’t the only country that is still asking questions at the moment,” Jens Spahn, the German deputy finance minister, said on Thursday on German radio.

Another concern for countries like Germany is that Mr. Tsipras might not be in power long enough to put the terms of the deal he negotiated in place if there are early elections in a political atmosphere where sentiment against diktats from the rest of the eurozone remains strong.

Mr. Regling, the head of the bailout fund, said he expected the amount the eurozone would eventually pay out to Greece in the three-year accord would be less than the full €86 billion. That sum, he said, would be offset by an eventual contribution by the I.M.F. and by receipts from privatizations of Greek state assets.

Over all, the loans “will allow Greece to service its debt, to repair its banks, to clear accumulated arrears, and to build cash buffers for the future,” Mr. Regling said. “This is critical to keep the economy working while giving time for Greece to restart reforming its economy and improving its administration.”

Even with a bailout, the Greek economy is still expected to shrink 2.3 percent this year and 1.3 percent in 2016. The dire economic conditions could provoke another political backlash against austerity in a country already reeling from years of recession and high unemployment.

And whether any of the debt relief measures will be sufficient to help Greece return to prosperity and pay back its vast loans is an open question for many European lawmakers.

“Without any commitment to debt forgiveness or restructuring, there will be no meaningful solution to the Greek crisis,” Sven Giegold, a German lawmaker who is the economy spokesman for the Green group at the European Parliament, said on Thursday. “This is what finance ministers should be prioritizing.”

http://www.nytimes.com/2015/08/15/business/international/eurozone-finance-ministers-greek-bailout.html?_r=0