Eurozone finance ministers have agreed to release the remaining 1 billion euros of the first installment under the second bailout to Greece by the end of this month, which was withheld due to concerns about the election outcome on June 17.
After the meeting in Luxembourg, Eurogroup Chairman Jean-Claude Juncker said he expects the troika- the International Monetary Fund, the European Commission and the European Central Bank - to visit Athens next Monday to review the implementation of the deficit cut program.
The troika is expected to discuss "an updated memorandum of understanding" of the bailout program with the new government. "We are in an urgent situation and all the procedures have to be speeded up," Juncker said.
He said the Eurogroup expects Spain to submit an official request for financial aid to recapitalize the country's banks by Monday. European authorities have already offered 100 billion euros assistance for Spanish banks.
The money will come from the Eurozone's rescue fund, European Financial Stability Facility (EFSF) and later it will be transferred to the European Stability Mechanism (ESM) when it comes into force.
An independent audit of Spain's banks on Thursday found that the banks would need up to 62 billion euros in extra funding. The audit was conducted by the US firm Oliver Wyman and German firm Roland Berger.
Meanwhile, in a report published Thursday after the regular Article IV consultations with euro area authorities, the IMF urged Eurozone to make more determined and collective response to the debt crisis.
IMF warned that low growth rates and rising market stress were hindering the reduction in debt levels. Contagion from further escalation of the crisis would have a substantial global impact, especially on neighboring European economies, it noted.
The lender urged the ECB to ease policy further, given the severity of the current economic situation. "With inflationary pressures expected to weaken substantially, the ECB has room, albeit limited, to ease policy rates and signal a commitment to a more accommodative stance for a prolonged period."
It also urged the central bank to ensure ample liquidity support to banks under sufficiently flexible conditions. The Fund observed that the bank could resort to unconventional measures, if necessary. The IMF recommended re-activation of the Securities Markets Program, additional Long-Term Refinancing Operations with suitable collateral requirements, or the introduction of some form of quantitative easing.
Speaking at the Eurogroup meeting, IMF Managing Director Christine Lagarde said the Fund's assessment supports a positive agenda in the short and medium term. "These steps should be supported by wide-ranging structural reforms throughout the euro area to raise growth, while demand support should be maintained in the short term to cushion the impact of the region's adjustment efforts," she added.
by RTT Staff Writer
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