European bailout fund grants release of aid to Greece

By MoneyTimes

Aug 21, 2015 06:39 PM EDT

The first tranche of the bailout package for Greece has been released.

The European Stability Mechanism board approved the release of €26 billion ($29 billion) Wednesday after assemblies of creditor nations, including Germany, endorsed the package.

Greece will use a portion of the sum to make a loan repayment to the European Central Bank Thursday.

The near-bankrupt country stands to receive a total of €86 billion ($95 billion) in financial aid from the European bailout fund.

The rest of the package will be spread out over the next three years, depending upon Greece's performance in meeting the terms of the bailout deal. Creditors want Greece to further cut spending, increase taxes, and reform its pension system.

"We will monitor the process closely," said Jeroen Dijsselbloem, chairman of the euro currency group, following the ESM board meeting.  "It's not going to be easy. We are certain to encounter problems in the coming years, but I trust we will be able to tackle them."

In Germany, the bailout package passed its last hurdle, with parliament voting 453-113 in favor of the deal. Eighteen abstained.

There had been speculations 120 lawmakers from the conservative bloc of German Chancellor Angela Merkel would oppose the package, dealing a blow to her authority. Only 63 of them voted against the bailout. That's slightly up from 60 conservative lawmakers who had voted last month against continuing bailout negotiations with Greece.

Germany is the largest single contributor to the bailout, and lawmakers were worried a part of Greece's debts could be written off, leaving taxpayers footing the bill. They said the International Monetary Fund should take part in the bailout because of its reputation for rigor. But the IMF stayed away from making a commitment, saying it would wait for the quarterly review of Greece in October.

Prior to the vote, Merkel's finance minister, Wolfgang Schaeuble, urged lawmakers to give Greece a chance of a new start. Though he himself had doubts, the popular minister said endorsing the deal would be "in the best interest of Greece and the interest of Europe."

Other European parliaments, including the Netherlands, Austria, Estonia, and Spain have also adopted the package.

A majority of Dutch lawmakers backed the deal Wednesday, although the credibility of Prime Minister Mark Rutte came under question.

One lawmaker, Geert Wilders, from the Freedom Party, called him "the Pinocchio of the Low Countries" for reneging on his 2012 campaign promise that he would not give a single cent to Greece.

But Rutte said the situation is now totally different. "In politics you have to take responsibility for things, and it sometimes happens that promises can't be kept."

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