EU approves 7.16b euro bridge loan for Greece

BRUSSELS - A senior official of the European Union (EU) said Friday a 7.16-billion-euro ($7.8 billion) bridge loan to Greece has been approved and would be given to Greece by Monday.

"We had an agreement on bridge financing for Greece based on the EFSM (European Financial Stabilisation Mechanism) law," said European Commission Vice President Valdis Dombrovskis.

"This agreement backed by 28 European member states provides Greece an immediate loan. It means that 7.16 billion euros will reach Greece on time by Monday," Dombrovskis told a press conference.

The 19 leaders of the Eurogroup on Monday struck a fresh deal on supporting Greece with a third bailout from the ESM (European Stability Mechanism) worth up to 86 billion euros (about $93 billion), but it could take weeks for negotiations on the bailout to complete.

The bridge loan will allow Greece to clear its arrears with the International Monetary Fund (IMF) and the Bank of Greece and to repay the ECB, according to an EU statement on Friday.

Greece failed to make a 1.5-billion-euro repayment due to the IMF on June 30 and missed a new repayment worth of about 456 million euros to IMF on July 13. To date, Greece's arrears to the IMF total about 2 billion euros.

The bridge loan will "have a maximum maturity of three months," until Greece would start receiving financing under a new program from ESM, the statement said.

Earlier, the German parliament voted an overwhelming "Yes" to start formal negotiations on a third Greek bailout.

A total of 439 lawmakers voted in favor of the talks, 119 opposed and 40 abstained, giving the German government a green light to negotiate with Greece on its third bailout within five years, a process expected to last for weeks.

The vote followed an over-three-hour debate where German Chancellor Angela Merkel told lawmakers that it was not only a decision on Greece, but also a decision on a strong Europe.

The chancellor said the third bailout was the only possible option to save Greece and European solidarity. Without a deal, chaos and violence would be resulted.

However, the number of lawmakers voted "No" was significantly higher than in February when the parliament voted on the extension of Greece's second bailout program. At that time, only 32 lawmakers rejected the extension.

Germany was the biggest contributor to previous two bailout programs to Greece. A nod from its parliament was one of the prerequisites for formal negotiations on the third bailout to really start.

Also on Friday, the Austrian parliament voted in favor of starting the talks, following legislatures in France and Finland.

According to an agreement reached by European leaders on Monday,

Greece's international creditors would be entrusted to negotiate with Greece on details of a planned three-year bailout program once relevant national procedures were completed.

When the negotiations conclude, any final deal has to be ratified again by parliaments of European countries, including Germany, before it enters into force.

Greek Prime Minister Alexis Tsipras reshuffled his cabinet on Friday, a day after Greek parliamentarians on Thursday approved a bill with an overwhelming majority to give the go-ahead to the debt deal the government reached Monday with international creditors. The approval is the first set of prior actions the country needs to take to unlock vital financing.

The Leftist leader replaced ministers of his Radical Left SYRIZA party who voted against the agreement and kept key ministries unchanged.

Thirty-two SYRIZA legislators voted No, among whom were Minister of Productive Reconstruction Panagiotis Lafazanis, Deputy Social Insurance Minister Dimitris Stratoulis and Deputy Defense Minister Kostas Isichos. Parliament Speaker Zoe Konstantopoulou, former Finance Minister Yanis Varoufakis, and Nadia Valavani who resigned on Wednesday from the post of deputy finance minister, were also among prominent SYRIZA members voting against the bill.

Greece's debts can only be sustainable with debt relief measures going far beyond what the eurozone has offered so far, according to an IMF report released earlier this week.

Meanwhile, German Finance Minister Wolfgang Schauble reiterated in his speech to parliament on Friday that debt haircut was illegal in the eurozone and thus was not a possible solution.

He warned that negotiation on the third bailout was "the last attempt" to resolve the Greek crisis, though a successful outcome to negotiations was by no means assured. (1 euro = 1.08 U.S. dollars)