WASHINGTON (AFP) ― The IMF on Monday released 2.2 billion euros ($2.95 billion) in rescue funds for Greece, giving a nod to new Prime Minister Lucas Papademos’s commitment to a tough reform program.

Delayed for months by political turmoil that led to the early November downfall of Prime Minister George Papandreou, the move opens the way for the European Union to release its 5.8 billion euro share of the latest bailout installment.

The funds could help Athens to avoid a looming default on its debt that many fear could crack the 17-nation eurozone.

But International Monetary Fund managing director Christine Lagarde also stressed that a restructuring of Greek sovereign debt by private banks, aimed at saving Athens 100 billion euros ($134 billion), was crucial to stabilizing its finances.

“Near-universal participation in the proposed private debt exchange will be important to realize a sustainable debt position, meet financing needs, and ensure continued Fund support,” Lagarde said in a statement.

The IMF’s executive board approved the immediate release of the funds Monday after reviewing Greece’s performance under the rescue program, launched in May 2010.

The 110 billion euro program, including 30 billion euros from the IMF, requires Athens to stick to reforms and austerity targets aimed at crunching its huge fiscal deficit and reducing its debt.

But by the middle of this year it was apparent that Athens was not meeting the targets, and the newest tranche of the loan was held back, risking allowing the country to default.

The board decision Monday though granted Athens waivers for not having met certain targets, opening the way for the disbursement.

Lagarde applauded the new government’s commitment, but urged it to adhere to structural reforms, warning that the Greek economy remains weak and threatened by a deteriorating external environment.

“Greece has substantial achievements to its credit, including a large fiscal deficit reduction,” she said.

“The creation of a national unity government and the endorsement of program objectives and policies by major parties is an important step. The new government should use its wider mandate to steadfastly implement the program, which is the best way to help Greece manage the risks it now faces.”

After years of mismanagement the country’s debt has soared to some 160 percent of gross domestic product, way above the EU limit of 60 percent and far beyond what Greece can afford.

Unable to garner support to implement reforms, Papandreou’s resignation opened the way for Papademos, a former European Central Bank deputy chief, to take power last month backed by a coalition of socialist, conservative and far-right nationalist parties controlling four-fifths of parliament

The parties have committed to adhere to reform and the parliament is expected to pass a new austerity budget late on Tuesday.

But left-wing parties remain opposed and have backed strikes and protests against the government.

Lagarde emphasized that fiscal austerity “remains the most immediate challenge for the authorities.”

“Adjustment efforts will have to be supported by a prompt implementation of underlying fiscal reforms, which are necessary to downsize the public sector and strengthen tax collection.”

The 2.2 billion euros freed up Monday takes to about 20.3 billion euros the total funds released by the IMF to Greece ― the most it has ever disbursed to any one country.