Millennium Post

EU set to clear $41 bn rescue aid for Greece

European Union leaders are expected to clear the way for releasing 31.5 billion euro [$41 billion] in urgently needed financial assistance for debt-stricken Greece at their two-day summit, which opened in Brussels on Thursday.

After months of speculation about whether Greece would remain in the euro zone, its chances to receive the next instalment from the second 130 billion euro [$168 billion] rescue fund pledged by the EU and the International Monetary Fund [IMF] have improved significantly.

German finance minister Wolfgang Schaeuble on Sunday ruled out the possibility of that country leaving the euro zone or becoming bankrupt. Until now, Germany insisted that the next tranche of the bailout fund, which was due to be paid in June, would be released only after the 'troika' experts of the EU, IMF and European Central Bank [ECB] present their report on Greece's compliance with the structural reforms and austerity measures it had promised to its international creditors.

Germany is now seeking the support of its EU partners for the proposal to set up a special account inaccessible to the Greek government to channel the assistance from the EU and the IMF, media reports said. The proposed account, which will be controlled by EU officials, is intended to make sure that the rescue funds are used to service Greece's debt and to avert a default. The money will not flow into the Greek budget, the reports said. Most of the euro zone nations are in favour of setting up a special account, according to the report.

Meanwhile, the European Commission announced in Brussels that the 'troika' team ended its work in Athens on Wednesday and reached an agreement with the Greek government on additional reform and austerity programmes.

But more discussions are needed to sort out some remaining issues and a final agreement is expected in the coming days, the commission said. The report is expected to show that Greece still has huge deficits in implementing reforms and budget cuts. Nevertheless, the assistance is likely to be released by the end of next month.

Greece faced the risk of running out of money without the long-awaited assistance. German economy minister Philipp Roesler expressed hope ahead of the summit that the euro zone is finally emerging out of the sovereign debt crisis which erupted in Greece and the country was rescued from bankruptcy with a 110 billion euro lifeline from the EU and the IMF.

‘The euro zone is on the right way to overcome the crisis,’ Roesler said. With the fiscal pact to enforce strict budgetary discipline and the permanent bailout fund the European Stability Mechanism [ESM], which came into operation nearly two weeks ago, important instruments to tackle the crisis have been put in place, he told a press conference in Berlin.

In order to prevent a similar crisis in the future, the German government will press for an agreement on strengthening the cooperation within the EU. It is seeking closer coordination of economic policies, more accountability and further progress towards a fiscal union.

The EU leaders will also discuss a proposal by Schaeuble to give new powers to the EU commissioner for economic and monetary affairs to reject national budgets if they violate the stability criteria. The summit will also discuss proposals by the heads of four leading European institutions to reform the monetary union.
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