Do Banks still do Bridge LoansBanks still make bridge loans?
This bridging credit is intended to cover EUR 4.2 billion in redemptions to the European Central Bank, EUR 400 million to the Bank of Greece and a further EUR 2 billion in back arrears to the International Monetary Fund in June and Monday. Dombrovskis said Greece must settle its debts with the IMF before the new programme begins.
Involvement of the Fund in a third bail-out is a policy imperative for EU executives such as Chancellor Angela Merkel, who insists that a new agreement secure the Fund's assistance. This three-month bridge credit will only be used to pay until 17 August if EU civil servants are hopeful that a new recovery plan is in place.
According to August forecasts by heads of state and government, Greece owed a further EUR 5 billion, of which EUR 3 billion in loan redemptions to the European Central Bank. "For the remainder of the bridge funding, it really matters how quickly the ESM (European Stability Mechanism) programme can be decided and whether there is a need for extra bridge funding or whether it can already be funded by the ESM," Dombrovskis said.
Federal Finance Minister Wolfgang Schäuble estimated that the trial for introducing the new rescue package would take four weeks, he said to journalists in Brussels on Tuesday. Funding comes from the European Mechanism for Stability in Finance (EFSM), an EU tool that has enabled the EU to raise up to EUR 60 billion on the finance market and use the EU balance as a guarantor.
Recognising that Europe's Heads of State and Government have reached agreement to begin negotiations on a new Greek bailout after their 17-hour meeting, the euro area has put together a tech support group to address the issue of bridge funding, which could have come from a range of different origins, some more sophisticated, some even more so than others. Conversely, Europe could grant Greece bi-lateral loans to help it meet its short-term debt commitments, despite the fact that many people hate to pump funds into a state.
" States such as the United Kingdom are strongly against the use of EU funding to make interim funding available to Greece, but the choice can be made by QMV. Following the conclusion of the new bail-out plan, the loans will be repaid to EFSM by the Eurozone bail-out plan to help prevent non-Euro member states in the EU from defaulting.
See here the opening speech of Dombrovski at the European Commission: