The Greek government announced Tuesday that it had struck a deal with its international creditors to unlock nearly 12 billion euros ($12.8 billion) in much-needed aid. In addition to the 2 billion euros ($2.13 billion) in aid disbursement, the funds also include 10 billion euros ($10.65 billion) to recapitalize beleaguered Greek banks.
“There was an agreement on all the milestones ... whatever was required,” Greek Finance Minister Euclid Tsakalotos told reporters after meeting representatives of European financial institutions and the International Monetary Fund.
Earlier this year, Greece and its international creditors agreed on an aid package of up to 86 billion euros ($92 billion). In exchange, the Greek government pledged to implement significant tax reforms, privatization and hugely unpopular austerity measures.
The immediate disbursal of 13 billion euros ($14.5 billion) to Greece in August by the European Stability Mechanism (ESM) -- the eurozone’s bailout fund -- allowed the country to repay a 3.4 billion euro ($3.7 billion) debt installment to the European Central Bank (ECB).
While Athens has since implemented a number of the unpopular reforms, it has also come under creditor pressure to adopt further measures, such as streamlining home loan foreclosures and handling tax arrears.
Moreover, according to a recent asset quality review of four of Greece’s largest banks -- Alpha Bank, Eurobank, NBG and Piraeus Bank -- by the ECB, the lenders are suffering from a 14.4 billion euro ($15.9 billion) shortfall in their reserves. In order to address the issue, the Greek government announced earlier this month that it will provide monetary aid to the banks by purchasing a mix of new shares and bonds.
The $10.65 billion loan will provide the government a significant boost in its efforts to recapitalize the ailing lenders.
According to media reports, Tuesday’s agreement covers home foreclosures, which the government was initially reluctant to accept in order to ensure a safety net for more vulnerable homeowners whose loans had soured.
The deal will now be submitted to the Greek parliament later Tuesday, and is expected to be approved by eurozone officials later this week.