World Economy

EU Approves Greece Bailout Extension

EU Approves Greece Bailout ExtensionEU Approves Greece Bailout Extension

Eurozone ministers approved a request from Greece for a two-month extension to its bailout program that was set to end December 31, amid an ongoing budget row between Athens and its EU-IMF creditors.

The decision comes a day after violent protests in Athens and a high-stakes budget vote in Greek parliament revived memories of the debt crisis that nearly sank the euro, AFP reported.

Pressure became even greater with the threat of snap legislative elections in Athens if Prime Minister Antonis Samaras fails to muster 180 votes in parliament to elect a new Greek president.

Moments after the extension decision, Samaras on Monday called for the first round of the presidential elections in parliament for December 17.

  Markets Spooked

A new line of credit became urgent after Athens proposed in October to break free completely of financial oversight. This spooked the markets, which sent Greek borrowing rates to dangerously high levels.

But a new credit line for Greece would require the previous bailout to be completed or terminated, and with a bitter row between the government and the creditors still ongoing, this seemed unlikely before December 31.

At issue is the fifth and final review of Greece’s current bailout, which would be the last 1.8 billion euro installment of almost 240 billion euros ($296.5b) in rescue funds lent Athens since 2010.

“Despite this progress there is not enough to conclude the review now or before the end of the year,” said Eurogroup President and Dutch Finance Minister Jeroen Dijsselbloem.

“Given this we have concluded that the Eurogroup would be favorable to a request by Greece for a two month extension of the program,” he said.

Before the talks, the influential German Finance Minister Wolfgang Schaeuble downplayed the difficulty of approving the extension.  

“If we need another extension, it wouldn’t be the first time,” Schaeuble said, while adding that Greece must remain on the path of reform.

The greenlight by the ministers now requires a fast track approval by member state parliaments before the end of the year.