On 19 August, the European Commission advised the eurozone member states to pay the second instalment of a loan to help Greece cope with the crisis, noting that Athens has met the required conditions through «impressive budgetary consolidation». «The overall positive assessment of compliance paves the way for the next tranche of loans,» explained the EU executive.

An initial instalment of €20 billion has already been paid. The second is expected to amount to €9 billion. The Commission expects the eurozone member states to approve and disburse this second instalment, but has not set a date. The Commission’s assessment of compliance with the conditions imposed on Greece will be discussed at the 7 September Eurogroup and Ecofin Council meetings.

Greece, struggling under a colossal debt that sparked a crisis, which even threatened to spread to the rest of the eurozone, adopted austerity measures in May in exchange for a three-year loan of €110 billion from its eurozone partners (two thirds of the total) and the IMF (one third).

«Greece has made rapid progress in the major structural reforms it has undertaken,» commented Economic and Monetary Affairs Commissioner Olli Rehn. He nonetheless added that «despite the significant progress made, challenges and risks remain. The main immediate challenge is to safeguard adequate liquidity and financial stability of the banking sector. At the same time, the structural reform agenda needs to be stepped up to unleash the huge potential for raising growth».

The Commission noted that Greek budgetary developments were positive during the first half of 2010, with the deficit declining faster than expected, by some 46%. Total state cash spending was reduced by 16.9% from the first half of 2009, reflecting primary expenditure cuts (including public sector wages), but also capital expenditure. There are, however, still a number of risks attached to the budgetary target. Total cash revenue increased by 5.9% in the first half, well below the annual target of a 15.6% increase. There are risks to the target being met stemming from the accumulation of arrears, the financial under-performance of local governments and of social security funds so far, and a catch-up in spending in the second half of the year.

Significant progress has been achieved in structural fiscal reforms: pension and public administration reform has advanced ahead of schedule. The adopted parametric changes to the pension system should significantly improve its long-term sustainability. Beyond fiscal-related issues, notes the EU executive, important steps forward have also been taken on the ambitious broader structural reform agenda.