The International Monetary Fund (IMF) on Saturday called on Eurozone leaders to offer debt relief to Greece, but warned of the debt becoming unsustainable without sufficient economic restructuring and supervision by the lenders.
Finance ministers of the 19 euro zone nations on Friday gave their approval for release of €26 billion ($29 billion) as the first tranche of the proposed €86 billion ($95 billion) in loans to Greece over the next three years.
Under the terms of the loan, Greece will have to substantially raise taxes while saving on expenditure besides fortifying banks with fresh capital.
IMF chief Christine Lagarde said the country needed significant relief "well beyond what has been considered so far".
She welcomed the agreement but warned Greek debt had become unsustainable. ''However, I remain firmly of the view that Greece's debt has become unsustainable and that Greece cannot restore debt sustainability solely through actions on its own,'' she said, adding, ''it is equally critical for medium and long-term debt sustainability that Greece's European partners make concrete commitments … to provide significant debt relief, well beyond what has been considered so far.''
Greece will receive the first tranche of loans of €26 billion. Once all 19 members of the euro area approve the loan
This include €10 billion to recapitalise Greek banks and the remaining €16 billion in several installments - the first of which will be delivered in time for Greece to repay about €3.2 billion to the European Central Bank (ECB) by 20 August.
European Commission President Jean-Claude Juncker said the deal sent a message "loud and clear" that Greece will stay in the Eurozone.
Once implemented, the European bailout will make Greece eligible for fresh relief from the IMF and the World Bank.
Lagarde said the debt relief supplemented by fiscal, structural and financial sector reforms will provide the basis for a credible and comprehensive programme to restore medium-term sustainability.
''We look forward to working closely with Greece and its European partners in the coming months to put in place all the elements needed for me to recommend to the Fund's executive board to consider further financial support for Greece.''