Greece reaches deal to release more bailout cash

The remainder is for recapitalising the banks – repairing their financial foundations so that they can function effectively.

Greece’s creditor powers have yet to begin talks over reducing the country’s €330bn debt pile – a key demand of prime minister Alexis Tsipras in return for signing up to an onerous new bail-out.

Greek stocks were up 3.8 per cent, with a banking index up 10.3 per cent.

The main disagreement remains over issues such as the treatment of bad bank loans, the rules for mortgage foreclosures and raising enough revenue to scrap a proposed tax on private education.

The Greek government is trying to obtain the release of €2 billion ($2.149 billion) in rescue loans and €10 billion ($10.74 billion) for the recapitalization of Greek banks.

The Greek Finance Minster Euclid Tsakalotos described it as a hard negotiation and said the pressure to get the deal finalised came from the need to support the banks. They remain badly hobbled by the crisis that played out over the country’s euro future in the first half of the year.

Still, Greece first has to legislate the agreed overhauls at a parliamentary vote on Thursday, before senior officials from eurozone finance ministries can give the go-ahead for the disbursement of the €12 billion. Currently, concerns over the banks’ health are so great that the government is still limiting cash withdrawals to 60 euros a day or 420 euros a week. The banks are unlikely to go back to business as usual immediately after the cash injection: limits on money transfers can take a long time – even years – to be lifted completely.

The agreement removed a major obstacle holding up fresh loans under a third, €86 billion bailout programme for Greece.

In the end the two sides agreed a compromise that would see the most vulnerable 25% of households being protected, while an additional 35% would get a few partial protection depending on a set of other criteria including income and the value of the house. Once the promised reforms have been passed and the bank recapitalization has taken place, discussions between Greece and its creditors can move on to how to lighten Greece’s public debt load, which could rise to around 190 percent of gross domestic product.