The European Stability Mechanism (ESM) on Wednesday approved Greek third bailout package, unlocking the first disbursement of 13 billion euros (14.46 billion U.S. dollars) to Greece a day before it has to repay a 3.2-billion-euro loan to the European Central Bank.
According to a statement released by the ESM, the board of governors, comprising the finance ministers of the euro zone's 19 countries, approved a proposal for a financial assistance facility agreement (FFA) with Greece, under which the ESM will provide up to 86 billion euros in financial assistance to Greece over three years.
The board also adopted a memorandum of understanding (MoU) with Greece, specifying the policy measures that the Greek government has agreed to undertake in order to tackle the main challenges facing its economy.
"Greek authorities have an opportunity to restore financial stability," Valdis Dombrovskis, vice president of the European Union (EU) and European Commissioner for the Euro, tweeted shortly after signing the MoU.
The first tranche of the ESM program will be 26 billion euros, including an up-front 10 billion euros buffer (cashless, to be disbursed in ESM notes) to repair the Greek banking system. It will not be transferred to Greece but go into a segregated account managed by the ESM in Luxembourg.
The other 16 billion euros aims to cover the repayment of the 7.2 billion euros bridge loan granted in July from the European Financial Stabilisation Mechanism (EFSM), the upcoming ECB and the International Monetary Fund (IMF) payments, and some arrears, the ESM said.
This part of the tranche will be released in separate payments: the first 13 billion euros immediately upon program approval, with the other 3 billion euros to be disbursed no later than Nov. 30, "if Greece completes additional prior actions."
"The total amount of financial assistance will also depend on Greece's success in implementing policy reforms, which are designed to ensure that Greece returns to market financing at reasonable cost before the programme ends. Privatisation proceeds may additionally reduce the overall amount of financial assistance needed," the statement noted.
Jeroen Dijsselbloem, chairperson of the ESM Board of Governors, said: "This agreement provides perspective for the Greek economy and a basis for sustainable growth."
Both the MoU and FFA were also approved by ESM members according to their national procedures, which included parliamentary approval in several countries including Germany, the Netherlands, Austria, Spain and Estonia.