The Greek government repaid a 3.4 billion euro ($3.7 billion) debt installment to the European Central Bank (ECB) Thursday after receiving the first tranche of new bailout funds. The development comes a day after the European Stability Mechanism (ESM) -- the eurozone’s bailout fund -- approved the disbursement of 86 billion euros ($96 billion) in financial assistance to Greece over a period of three years.
“The board also decided to immediately disburse 13 billion euros ($14.5 billion) to Greece. Today’s disbursement is the first part of a sub-tranche of €16 billion, to be used for budget financing and debt servicing needs,” the ESM said, in a statement Thursday, announcing the release of the funds. “The remaining 3 billion euros ($3.3 billion) of this sub-tranche will be disbursed at the latest by the end of November, once Greece has completed additional prior actions.”
While Thursday’s initial tranche was paid in cash, another 10 billion euros ($11 billion) for recapitalization of banks will be held in a segregated account in the form of ESM notes.
“The second sub-tranche of 10 billion euros will contribute to stabilizing the banking sector, whose situation deteriorated sharply after the imposition of capital controls in June,” ESM Managing Director Klaus Regling said in the statement.
Under the terms of the bailout agreement -- approved by the Greek parliament last week -- the government will have to implement tax rises and spending cuts in return for funds. Additionally, the Alexis Tsipras-led government has also promised to overhaul non-performing loans, and establish a fund to manage the proceeds from the privatization of state assets.
However, Tsipras, whose leftist Syriza party came to power last year on an anti-austerity platform, has faced considerable opposition over the bailout deal from within his party, with many accusing him of betraying his earlier promises. Following Friday’s vote in the parliament, where he failed to secure enough votes to maintain his majority, a confidence vote -- eventually leading to early polls -- seem increasingly likely.