Greece cleared a key hurdle toward receiving around 1 billion euros ($1.1 billion) in cash for debt relief, as the European Commission said the country has fulfilled all reform conditions required in its latest post-bailout audit.

In a report reviewing Greece’s record in completing the overhauls attached to further aid, the EU’s executive arm paved the way for a final decision to be taken by euro-area finance ministers when they meet in Bucharest, Romania, later this week.

The report comes after a prolonged spat over Greece’s household insolvency framework, which creditors worried could harm the country’s payment culture and weigh on its troubled banks. Greek lenders have the highest ratio of soured loans in Europe.

Greece finally voted for the controversial framework in parliament last week addressing some of the creditors’ concerns. While the report said “some risks to financial stability and payment discipline remain,” it suggested the new insolvency regime was sufficient for the euro area to take a decision to release the tranche.

The report “could be used by the Eurogroup to agree on the release of a first tranche of policy-contingent debt measures,” it said. The reserved wording reflects some concerns in the euro area that the new insolvency framework could still end up being too generous.

“The extension of the perimeter to business loans raises particular concerns which have been communicated to the Greek authorities,” the commission said. “It also warrants particular attention from a financial stability perspective, as the available impact assessments indicate that larger debt write-offs will be required compared to residential mortgage loans, and thus the estimated impact on banks’ capital is comparatively high.”

Bond Sale

The Greek government has been waiting for the green light from the currency bloc before it can begin a procedure for the early repayment of some of its loans from the International Monetary Fund. Greece is also considering another bond sale in the coming weeks or months or a reopening of one of the latest notes it has issued.

Yields on Greek five-year bonds have fallen to a record low showing that currently there is an appetite for Greek risk. The disbursement of the tranche could boost investor sentiment further, as a nascent economic recovery gains hold.

Euro-area finance ministry officials are expected to hold a call later on Wednesday to discuss the report and possible debt relief tranche ahead of the ministers’ meeting later this week.

— With assistance by Sotiris Nikas