Greece is expected to meet a key €3.5 billion payment to the European Central Bank on Monday after the eurogroup of finance ministers approved a €7 billion bridging loan for the indebted country.
Euro zone finance ministers on a conference call on Thursday morning decided to back the European Commission proposal to offer a €7 billion bridging loan to Greece from the European Financial Stability Mechanism (EFSM) fund, despite opposition from Britain.
A proposal to guarantee the contributions of non-euro countries such as Britain and the Czech Republic with euro zone funds was expected to placate opposition from London.
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Political signal
The eurogroup’s move was seen as an important political signal following Wednesday’s vote in the Greek parliament which saw Greek MPs back a raft of austerity measures demanded by creditors in exchange for a third bailout package.
Though work on technical details of the short-term loan will continue until tomorrow, the new loan will be the first disbursement of cash from creditors to Greece in months.
The ECB also announced on Thursday it has increased its provision of emergency funding to Greece slightly, though it declined to comment on when the Greek banking system might reopen.
European Central Bank president Mario Draghi said the ECB had increased emergency liquidity assistance (ELA) to Greek banks by €900 million over one week.
Speaking at a press conference following the bank’s regular interest rate-setting meeting in Frankfurt, Mr Draghi said he was confident Greece would meet its payment on Monday.
Kept afloat
The ECB has been keeping the Greek banking system afloat with just under €89 billion in loans. Mr Draghi said total ECB exposure to Greece now stood at €130 billion.
He backed calls for Greek debt relief. “Nobody has ever disputed [debt relief for Greece],” he said.
“The issue is what is the best form of debt relief within our framework, within our legal institutional framework. I think we should focus on this point in the coming weeks.”
Asked about criticism of the actions of the ECB during the Greek crisis, its president said the biggest deposit flights had coincided with big political events such as January’s election and the collapse of bailout talks in June.
“So I find these observations that there wasn’t enough liquidity assistance or that there was a bank run caused by the ECB quite unwarranted, certainly unfounded,” he added.
He said the ECB’s provision of ELA was “never meant to be unlimited and unconditional”.
Further integration
He said the Greek crisis had highlighted the need for further integration within the euro zone.
“This union is imperfect, and being imperfect is fragile, vulnerable and doesn’t deliver ... deliver all the benefits that it could if it were to be completed,” Mr Draghi said.
“The future now should see decisive steps on further integration.”
Meanwhile, European shares reached a six-week high on the back of the Greek vote, which saw 228 of the 300 MPs vote with the government.
With Germany due to vote on a third bailout package for Greece on Friday, Finland has already given parliamentary backing to the deal.
