EU Commission Proposes EUR 7 B Bridge Loan to Greece
The European Commission (EC) is proposing to grant EUR 7 B bridge loan to Greece in order to cover the country's financing needs in July.
The funds will be provided through the European Financial Stability Mechanism (EFSM), daily Kathimerini reports.
According to the proposal, the bridge loan will have a maximum maturity of three months and will be repaid to EFSM from the bailout, which Greece is expected to get from the European Stability Mechanism (ESM).
However the proposal to use the EFSM for the bridge loan is controversial, as the UK and the Czech Republic are opposed to such a move.
Unlike the ESM, the EFSM is an EU-wide fund, which is backed by the EU budget and disbursements from it need to garner the approval of all 28 EU member states.
However decisions in the EFSM are taken by qualified majority voting, meaning that the proposed bridge loan can be approved by sixteen countries representing 65 % of the EU's population.
The proposal foresees providing the bridge loan in one go, which would allow Greece to redeem its bonds held by the European Central Bank (ECB) on Monday and pay its overdue installments to the IMF.
The proposal of the Commission will be presented for approval to EU finance ministers later on Wednesday.
However an important provision ensures that the bridge loan will be granted only in case the Greek parliament passes the economic reforms agreed between Athens and the eurozone leaders on Monday.
Among the reforms, which Greece has to implement in order to be granted the bridge loan, are the increase of the Value Added Tax (VAT) revenues by 1 % of GDP annually, reform of the pension system and greater independence of the Hellenic Statistical Authority (ELSTAT).
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