Greece to get €7bn loan on Monday
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The €7.16bn loan will be have to be repaid in three months (Photo: Barcex)
By Eric Maurice
Greece will receive a €7.16 billion loan on Monday (20 July) after EU member states agreed to use the European Financial Stabilisation Mechanism (EFSM) to provide the money.
The loan "will allow Greece to clear its arrears with the International Monetary Fund (IMF) and the Bank of Greece and to repay the European Central Bank (ECB)", the Council of the EU said in a statement.
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Greece owes €2 billion to the IMF and is due to repay €4.2 billion to the ECB on Monday.
ECB chief Mario Draghi said in Thursday (16 July) that he was confident the ECB "will be repaid, as well as the IMF".
All EU member states agreed to the EFSM loan after the European Commission, including the UK who said at first that "the eurozone needs to foot its own bill".
The EFSM is an EU-wide emergency fund in which all member states, including non-eurozone countries have liabilities.
Guarantees
"A mechanism has been designed so as to ensure that non-euro area member states do not carry any risk," said the Council statement.
The commission proposed that the loan is guaranteed by profits made by the ECB on so-called SMP and ANFA programmes. The SMP was a programme of emergency bond-buying operation by the ECB and national central banks from 2010 to 2012. The ANFA is a Eurosystem investment portfolio.
With these money available at the ECB, "there is more immediate guarantee for non eurozone countries" in case Greece failed to repay loan, commission vice-president Valdis Dombrovskis said at a press conference.
The EU budget will provide a second level of guarantees.
"Should Greece fail to repay the ECB loan, this amount can be withheld from future EU payments for Greece," Dombrovskis said.
The money would be taken from structural fund earmarked for Greece.
The loan will be disbursed in two installments and will have to be repaid in three months, after Greece starts receiving the €82 billion to €86 billion bailout for which negotiations will start soon.
Debt
Meanwhile, the European Stability Mechanism approved on Friday the decision to grant Greece a loan programme.
This allows the creditors institutions - the EU, the ECB, and the IMF- to negotiate a new Memorandum of Understanding with Greece.
But on Friday morning, IMF chief Christine Lagarde warned that her institutions would participate only if a debt relief is included in the programme.
"I would expect that debt will be part of the negotiations because it is something the IMF insists on and IMF should be part of the third programme", Dombrovskis said at his press conference.
