Greek bailout begins to pay central banks

Tim Wallace
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GREECE received the first tranche of its second bailout yesterday, as the German cabinet prepared to approve the permanent European Stability Mechanism (ESM) rescue system.

The EU and International Monetary Fund (IMF) paid Greece the first €7.5bn (£6.26bn) of its latest bailout, with the bulk of the payment going to repay bonds held by the Eurozone’s central banks.

The international creditors last week approved a €130bn rescue for the troubled Eurozone state, which is still led by interim Prime Minister Lucas Papademos (right).

The deal included a €100bn haircut imposed on private bondholders.

However, official creditors like the European Central Bank (ECB) have refused to take losses on their bonds.

Of the cash handed over yesterday, €4.66bn has gone to the ECB and other central banks, covering the capital amount of a three-year bond which expired yesterday.

Meanwhile Germany continued preparations for any future crisis and bailout needs, with the cabinet expected to approving measures for a permanent bailout fund.

All Eurozone countries need to approve the fund by June so the fund can be in place by July – a year earlier than initially planned.

However, the countries involved are still not sure the €500bn fund will be big enough, though Germany is reluctant to commit more resources.

The exact size will be discussed at a summit at the end of this month, with one possible option being to roll the €440bn European Financial Stability Facility into the ESM, or to increase the fund by half as a compromise between Germany and the other member states.