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25th Mar 2023

Eurozone blocks €1bn of aid amid Greek uncertainty

  • Ex-finance minister Venizelos (l) will have the final try at forming a government (Photo: consilium.eruopa.eu)

Eurozone officials on Wednesday night (9 May) agreed to pay only €4.2 billion as first bail-out tranche for Greece, an outstanding 1 billion being blocked until June, amid growing political uncertainty in Athens and another failed attempt to form a government.

"The Board has confirmed the release of the outstanding amount of €5.2bn from the first installment...an amount of €4.2bn will be disbursed on 10 May. The remaining funds of €1.0bn are not needed before June and will be disbursed depending on the financing needs of Greece," reads a statement from eurozone's temporary bail-out fund, the European Financial Stability Facility.

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Its board of directors comprises of finance ministry officials from each of the 17 eurozone countries.

The statement also noted that the money is put into a "segregated account" and used to pay back Greece's debt.

The payment, which will allow Greece to pay some €3.3 billion it owes the European Central Bank next week, is the first tranche of the €130 billion bail-out agreed in March.

Germany, Finland and Luxembourg had signalled reluctance to pay out the full tranche as long as no government is in place. A majority of the parties emerging from last Sunday's elections is calling for the bail-out programme to be re-negotiated or even abandoned completely.

"We have to say to the Greek people right now that the situation is serious, that no European Union country will be able to release even a portion of the €130 billion for the Greeks, if there is no functioning government that respects the rules and manages the disbursed money," Luxembourg's foreign minister Jean Asselborn said Wednesday during a debate in Brussels.

German finance minister Wolfgang Schauble also warned that Greece needs to stick to the austerity and reforms programme if it wants to stay in the eurozone.

"They need to form a stable government and strictly respect their commitments, in the same way that we will respect our obligations to Greece," Schaeuble said.

But the second attempt to form a government failed on Wednesday, as radical-left leader Alexis Tsipras threw in the towel following two days of talks.

"We appear not to have been able to settle on a decision," ex-finance minister Evangelos Venizelos said after having refused Tsipras' demand to abandon the austerity measures linked to the bail-out.

Venizelos, whose centre-left Pasok party was punished by voters last week for having signed up to the austerity programme, will now carry out the last attempt to form a government. If he too fails, fresh elections are slated for June, increasing the chances for an even larger anti-bail-out majority to emerge.

Tsipras earlier this week wrote letters to the EU commission and the European Central Bank saying his country has voted against the 'barbaric' bail-out, which means it should be nullified.

He has also asked to meet France's newly elected president Francois Hollande who had criticisd Berlin's austerity drive prior to his election. But his request was turned down.

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