Greece Progresses on Rescue

ECB okays interim financing; troika wins agreement on policy efforts

A New Democracy supporter waved a Greek flag during a rally in Athens before the election in June. (Photo: AP) A New Democracy supporter waved a Greek flag during a rally in Athens before the election in June. (Photo: AP)

Greece stepped back from the brink over the weekend, after the European Central Bank (ECB) decided to permit a larger limit on short-term loans accepted by the Bank of Greece and the “troika” of the ECB, the European Union and the International Monetary Fund (IMF) felt it had made progress in getting Athens to agree to strengthening policy efforts in exchange for release of the next tranche of rescue funding.

Reuters reported late Friday on a decision by the ECB’s Governing Council to raise the upper limit for the amount of Greek short-term loans the Bank of Greece can accept in exchange for emergency loans. The Greek central bank had been limited to 3 billion euros ($3.70 billion) in treasury bills as collateral for emergency liquidity assistance (ELA).

The ECB raised that limit to 7 billion euros, Reuters reported, citing the German daily paper Die Welt. The move is expected to keep Athens afloat until the troika decides to let the next round of rescue money flow.

The troika, too, had optimistic news after almost two weeks of meetings with Greek policymakers. Bloomberg reported Monday that after meetings that began July 24 and continued over succeeding days, Greece had agreed with its creditors that it would strengthen its policy efforts to support the economy and comply with its bailout terms.

In a joint statement issued Sunday, the three groups of officials said in part, “The discussions on the implementation of the program were productive and there was an overall agreement on the need to strengthen policy efforts to achieve its objectives,” adding that they would return in September to resume discussions.

Greece must put together a package of 11.5 billion euros in budget cuts for next year and the year after in order to keep the money coming—some 4.2 billion euros it was first scheduled to receive in June as the first tranche of a bailout package totaling 31 billion euros. The package of cuts must be complete before the next meeting of eurozone finance ministers in early September, according to an unidentified Greek Finance Ministry official cited in the report.

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