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EU bailout fund rescues Greece's top bank Luxembourg

[ATHENS]The eurozone's bailout fund rescued Greece's largest bank on Tuesday, launching a recapitalisation process that is a crucial part of the country's third loan programme in five years.

The European Stability Mechanism unlocked US$2.88 billion, to shore up Piraeus Bank, Greece's biggest lender, a statement said.

"Strengthening the stability of the banking sector was a key objective of the third assistance programme for Greece," Klaus Regling, head of the ESM rescue fund said in the statement.

"Healthier banks will be able to start lending to Greek businesses again and support an economic recovery," he added.

After months of haggling, Greece in July secured a US$92 billion rescue from its eurozone partners.

Eurozone finance ministers approved a two-billion-euro payment to Greece and unlocked a total of 10 billion in bank recapitalisation funds last month after Athens adopted crucial reforms demanded by its creditors.

As a condition of the bailout, Greece's four biggest banks last week raised private capital to qualify for matching recap funds from the ESM.

Two of those lenders, Eurobank and Alpha Bank, raised enough private funds to forego bailout money altogether, while Piraeus Bank and National Bank of Greece still required a capital boost.

A stress test by the European Central Bank determined last month that capital needs at Piraeus were around five billion euros, of which private investors provided just two billion euros.

The ESM said it would consider paying out more bank recapitalisation funds on a case-by-case basis with a decision for the National Bank of Greece expected soon.