EC offers Greece $7.7 bn bridge loan for 3 months

The European Commission, or EC, offered Greece a bridge loan worth 7 billion euros ($7.7 billion) with a maximum maturity of 3 months, paid for by the European Financial Stabilization Mechanism, or EFSM.

The EC made it clear that the loan would allow Greece to address its most pressing financial obligations until it begins to receive the financial assistance from the Financial Stabilization Mechanism.

The EFSM protects all member states of the European Union, and can be resorted to in extraordinary circumstances such as the case of Greece, while it has helped rescue Portugal and Ireland in the past.

European Commissioner for the Euro and Social Dialogue Valdis Dombrovskis explained that the 19 member states of the Eurogroup must approve this proposal.

“Greece needs bridge financing until the new program can be put into place, in order to preserve the integrity of the euro area, financial stability and to avoid further default on its repayment obligations,” the EC confirmed in its proposal to the member states.

As for refusing the service to EU countries that don’t use the euro, such as the United Kingdom, Dombrovskis said that using the EFSM “is not an easy option.”

“Some member states have serious concerns. We also need to address this political difficulty_ We are therefore working on arrangements to protect noneuro area member states from any negative financial consequences, should the EFSM loans not be repaid,” the EU commissioner added.

The EC identified a set of rules to provide Greece with this bridge loan, including that Greece start implementing the procedures provided for in the rescue program.

“Given the political, legal, financial and time constraints, there were two most realistic options left: bilateral loans and the program from the European Financial Stabilization Mechanism, or EFSM. However, there are currently no prospects for any bilateral help.”