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Greece to receive 40 bln euros

Xinhua, March 15, 2012

• Eurozone countries Wednesday formally approved the first batch of 39.4 billion euros (50.9 billion U.S. dollars) under the second bailout package for financially-strapped Greece, said Eurogroup Chairman Jean-Claude Juncker.

  All required national and parliamentary procedures have been finalized for the release of the fund, Juncker said in a statement, adding that the installment would be disbursed in several tranches.

  Most of the money is expected to be used by the Greek government to recapitalize its banks, as well as to plug its budget deficit.

  Saying that the financial aid is "a unique opportunity for Greece that should not be missed," Juncker urged Athens to honor its commitment of fiscal consolidation, structural reforms and privatization so as to return the Greek economy "to a sustainable path, which is in the interest of everyone."

  Also on the day, the Greek cabinet unanimously approved the terms of its second international bailout of 130 billion euros.

  The deal to keep Greece funded until 2014 will now be sent for approval to the Greek parliament, which is expected to vote on it by the end of the month.

  Greek Prime Minister Lucas Papademos told his cabinet Wednesday that the Greek parliament needs to pass an additional eight bills linked to the bailout deal.

  "The cabinet and parliament must undertake a great effort to complete this legislation in the coming weeks," he said.

  According to Juncker, the first installment of 39.4 billion euros will come from the European Financial Stability Facility (EFSF), a temporary rescue mechanism set up by the European Union (EU) in May 2010 when several EU members were bogged down in debts.

  The EFSF now has a lending capacity of 250 billion euros after paying out some 190 billion to rescue Greece, Ireland and Portugal.

  The EFSF, according to the initial design, was to expire at the end of 2013.

  However, as the more permanent European Stability Mechanism (ESM), set up to replace the EFSF, is due to come into force in July, the future of the EFSF became a subject of heated discussion within the eurozone and also in international bodies such as the IMF.

  Many argued the two funds should be run in parallel for a year from July so that the EU could have a larger war chest, with a combined lending capacity of 750 billion euros.

  As Europe's largest economy and major paymaster, Germany has been reluctant to respond to the call due to increasing domestic pressure.

  Nevertheless, the German government on Wednesday ratified a draft bill to provide 22 billion euros in cash and loan guarantees of up to 168 billion euros to shore up the ESM.

  The draft will be put to vote in both houses of German parliament at the end of March.

  Germany has already pumped 8.78 billion euros into the ESM this year, making the country the top contributor to the fund's 80 billion euro cash reserve.

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