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Greece gets relief from creditors after first austerity test

Published:Thursday | July 16, 2015 | 3:55 PM

Greece got a triple dose of good news on Thursday, when creditors agreed to open talks on a third bailout package, to give the country an interim loan to cover its debts, and to provide more support to its shuttered banks.

Greece's fellow states in the 19-country eurozone said they were willing to open talks on a new rescue package worth €85 billion (US$93 billion) over three years after Athens approved a series of tax hikes and economic reforms overnight.

The austerity bill triggered a revolt in the governing party and demonstrations in central Athens, one of which briefly turned violent, but was required by creditors as a precondition for starting bailout talks.

Because completing a new rescue deal is expected to take up to four weeks, Greece's European creditors also agreed on interim financing in the meantime. European Commission head Jean-Claude Juncker confirmed that an EU-wide bailout fund would give Greece a loan to cover it through mid-August.

Finally, the European Central Bank agreed to increase the amount of emergency credit available to Greek banks by €900 million (US$980 million) over one week, a first step toward helping them reopen.

The banks have been closed since June 29 to stanch a bank run, with Greeks limited to cash withdrawals of €60 (US$67) per day, and the ECB had not raised the credit it makes available since last month. The extra credit is needed to make up for the constant outflow of money from the banks.

It remained unclear how quickly Greece's banks could reopen or when they might ease the limits on cash withdrawals.

The government must now pass a second bill through Parliament next week, which includes reforms to civil justice procedures.

Dangerously low on liquidity at banks and with the state practically out of cash, Greece desperately needs funds.

The four-week loan that European Commission President Juncker revealed on Thursday would allow Greece to meet a debt repayment worth €4.2 billion (US$4.6 billion) to the ECB on Monday and to pay arrears of €2 billion to the IMF.

Greeks have seen a dramatic decline in living standards since the debt-plagued country lost market access in 2010 and had to impose severe spending cuts in exchange for bailout loans from eurozone countries and the International Monetary Fund.

"Now I think that things will turn out for the best, as long as those in power can act with good intentions, without corruption," said pensioner Giannis Filinis as he waited in a queue outside a bank to withdraw the maximum €120 for retirees without bank cards. "They should have controlled the situation and avoided bailouts, because we are the ones that have to pay for it now."