Greece signed a deal with the European Commission and the European Investment Bank (EIB) on Thursday to set up a fund that will help its tourism-reliant islands wean off fossil fuel and reduce power costs, the Greek government said.

Greek Prime Minister Kyriakos Mitsotakis met EIB's Chair Nadia Calviño on Thursday. Mitsotakis then attended a ceremony for the signing of the agreement on the island of Naxos.

Most of Greece's rocky and sun-drenched islands in the Aegean and the Ionian Sea in southern Europe depend on costly oil-fired stations to generate electricity that occasionally break down when demand peaks with the arrival of thousands of tourists in the summer.

Greece has made strides in expanding cheap renewable energy to nearly half of its power generation. But Mitsotakis said the Mediterranean country still relied heavily on expensive oil and gas imports.

"The fund we're presenting today is a financial tool which will facilitate our islands to make green transition a reality," Mitsotakis told the event in Naxos at the presence of senior European Union and EIB officials.

The aim of the deal is to allow Greece mobilise 5.6 billion euros ($2.11 billion) to speed up the construction of power links and wind and solar stations with batteries and finance water reservoirs for hydroelectric power and charging stations for docking ships on the islands, a senior EIB official told the same event.

The EIB has invested nearly 50 billion euros in small and medium-sized companies, infrastructure, tourism and energy in Greece since 1963.

(Reuters)