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EU approves latest bailout payment for Greece

By the CNN Wire Staff
Protesters clash with riot police in Athens on June 28 after the Parliament voted in favor of a proposed bailout.
Protesters clash with riot police in Athens on June 28 after the Parliament voted in favor of a proposed bailout.
  • European Union making bailout payment to Greece
  • Nation this week approved new austerity measures
  • Unemployment has soared to more than 16% in Greece

(CNN) -- The European Union's finance ministers Saturday approved the disbursement of 12 billion euros (U.S. $17 billion), the fifth tranche of bailout funding for Greece.

The disbursement, which will be made by July 15, follows the Greek Parliament's approval this week of new austerity measures.

"The Greek authorities provided a strong commitment to adhere to the agreed fiscal adjustment path and to the growth-enhancing structural reform agenda, which are essential components of our strategy to restore fiscal sustainability and safeguard financial stability," ministers said in a statement.

European officials now will work on a second proposed bailout.

The bailout is a highly contentious subject in Greece. As the Parliament voted in favor of the funding on June 28, thousands of protesters descended on Athens and clashed with riot police. Tear gas choked the streets as protesters and police pounded each other with clubs and fire bombs.

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Since 2010, the Greeks have faced a myriad of austerity measures including pension cuts, a boost to the sales tax, excise taxes on fuel, cigarettes, alcohol and luxury goods, more stringent eligibility for disability benefits and a hike in the retirement age to 65 from as low as 61.

On Wednesday and Thursday, the Greek Parliament approved a new raft of austerity measures: Reducing the pay of public workers, increasing the attrition of public jobs and ramping up taxpayer compliance.

Tax dodging, in particular, is one of the most chronic fiscal problems in Greece. Many of the protesters in Athens blame rich tax evaders for their nation's troubles. The protesters, particularly the young and unemployed, believe they're being forced to shoulder an unfair burden to get their country out of hock.

Marko Mrsnik, the lead analyst in the recent Standard & Poor's downgrade of Greece, blames the austerity measures for exacerbating the shoddy job market. The unemployment rate has soared to 16.2%, compared to 11.6% in March 2010, he said.

Greece will be able to keep functioning for a while longer. But the bailout won't take care of the nation's long-term budget problems, according to Mark Blyth, an economics professor at Brown University in Providence, R.I.

"This is simply giving them more breathing space while they're kicking the can down the road," said Blyth, referring to the bailout. "They need to have enough money to cover the primary fiscal debt, keeping the lights on at the hospitals and the military bases. Once they've got that, they're able to default without shutting down the country."

Blyth believes that a Greek default is inevitable. "Ultimately, there's no way the Greeks can pay back what they've borrowed," he said.

CNN Money's Aaron Smith contributed to this report.