ESM: First loan tranche for Greece to be paid out on second half of June

The European Stability Mechanism (ESM) published on Monday an updated report on the decisions taken at the last Eurogroup meeting for Greece and the details for the disbursement of the country’s loan installments.

According to the announcement, the ESM Board of Directors is expected to approve the disbursement of the second tranche of the ESM loan facility amounting to 10.3 billion euros. The second tranche will be split into several disbursements, the first of which could be made in the second half of June, if Greece meets all the necessary preconditions, the announcement says.

“The first disbursement would amount to 7.5 billion euros, to be used for debt service obligations and the clearance of domestic arrears. Subsequent disbursements would be made after the summer and will be subject to the completion of milestones,” it said.

On the actions that are required to unlock the loan tranches, the ESM says the Greek government “must fully implement all the prior actions included in the first review, while several ESM member-states will need to receive approval from their national parliaments”. Furthermore, the ESM Board of Governors is expected to approve the supplemental Memorandum of Understanding (MoU) reflecting the staff-level agreement. In the last step, the ESM Board of Directors will take the formal decision to disburse funds to Greece.

Concerning the debt relief measures agreed at the fiannce ministers’ meeting that will be implemented in the short-term, after the first review is completed, they include: Smoothening the EFSF repayment profile, the repayment of certain loan tranches under the EFSF loan facility can be extended within the agreed maximum weighted average maturity of 32.5 years and using the EFSF/ESM diversified funding strategy to reduce interest rate risk.

“The EFSF/ESM is working on different ways to optimise the structure of outstanding debt according to the different loan profiles of our beneficiary member-states,” it added.