Europe agrees Greece aid payout

European finance ministers have approved a much-anticipated €8.7bn ($12.6bn) aid payment to Greece, ensuring the country will not default on its sovereign bonds this month and clearing a hurdle that had spooked global financial markets.

The move came after the Greek parliament this week passed a wrenching €28bn austerity bill which the European Union had set as a precondition for more aid. Athens was at risk of becoming the first developed country in 60 years to default on its debt on July 15 if the aid payment was not approved.

Despite the approval, which came on Saturday evening, European leaders failed to agree on a new €120bn bail-out package for Greece, which many officials had hoped to complete this weekend.

Without a second bail-out finalised, IMF approval of its portion of the next aid payment had been in question, since the Fund had blocked its aid unless a new, longer-term financing plan was in place.

But according to European officials, the Fund was persuaded by the language in the communiqué of last week’s summit of EU heads of government, which vowed it would complete a second bail-out once Greece passed the austerity package.

On Saturday, the Fund said Greece’s passage of the austerity programme should allow its board to “release of the next tranche” when it meets on Friday.

Eurozone governments spent much of the last week haggling over the new bail-out, which would be the second rescue of Athens by the EU in just over a year.

The delay was caused by a German-led group of creditor countries, which has been in talks with private holders of Greek bonds in a bid to get them to shoulder a significant portion of the new bail-out.

Officials said the group were unable to agree on the level of bondholder participation, and so were forced to delay a final deal on a second rescue. Another round of negotiations is expected on July 11, when eurozone finance ministers are scheduled to meet again in Brussels.

In a statement after a rare Saturday evening conference call, eurozone finance ministers were vague about the talks with the bondholders – which include several German and French banks – saying only that the issue would be resolved “in the coming weeks”. One eurozone diplomat, however, said a decision would likely be finalised “only after summer”.