BRUSSELS (MNI) – Greece’s international bailout partners reached a
provisional agreement early Tuesday to pay some overdue aid to Greece
next month, provided a planned debt-buyback succeeds, but they attached
further conditions to future aid that will likely be needed to keep the
country’s debt at sustainable levels.
Speaking to reporters after 13 hours of talks, the head of the
Eurozone finance ministers’ group, Jean-Claude Juncker, said that formal
approval of E34.4 billion in aid would likely take place on 13 December
provided that the deal is approved by Eurozone parliaments and
“following a review of the outcome of a possible debt buy-back operation
by Greece.”
Payment of the remaining E9.3 billion of overdue aid, would be
dribbled out in three tranches in the first quarter of 2013, provided
certain milestones, including a reform of the Greek tax system, are met
in January, the Eurogroup said.
Although the Eurogroup acknowledged that Greece had met all the
conditions to receive the aid, it tightened the reins on Athens with
“updated programme conditionality.”
Greece will now be expected to transfer all privatization revenues,
the targeted primary budget surplus and 30% of any excess surplus, into
a dedicated account “to meet debt service payments on a quarterly
forward-looking basis.”
To stop Greece’s debt from swelling to a projected 144% of GDP in
2020, the finance ministers agreed a E40 billion, multi-pronged strategy
that should cut the country’s projected debt burden by as much as 20% of
GDP, subject to the successful conclusion of a bond buyback plan and
provided Athens keeps up its fiscal and structural reform efforts.
The measures would include a 100 basis point cut on the interest
rate charged on bilateral loans made to Athens by Eurozone governments
and an agreement to pass on to Greece the profits central banks earn
from their holdings of Greek government bonds. However, Portugal and
Ireland, which have also been bailed out by Eurozone governments and the
IMF, would be exempt from making these concessions to Greece.
Under the terms of the deal, the European Financial Stability
Facility bailout fund would extend the maturity on its loans to Greece
by 15 years, defer interest charges for 10 years, and lower by 10 basis
points the guarantee fees paid by Greece on EFSF loans.
“The Eurogroup stresses, however, that the above-mentioned benefits
of initiatives by euro area member states would accrue to Greece in a
phased manner and conditional upon a strong implementation by the
country of the agreed reform measures in the programme period as well as
in the post-programme surveillance period,” Eurozone finance ministers
said in a statement.
In a move to satisfy IMF demands that Greece’s debt be brought down
to sustainable levels, the 17 finance ministers also agreed that they
would consider in the future other measures, such as further reducing
Greece’s interest charges, and more generous EU development aid terms –
but only if Greece had honoured all its commitments and only once Athens
had reached a primary budget surplus.
The IMF wants to see Greece’s debt-to-GDP ratio fall from a
projected 175% in 2016, to 124% of GDP in 2020 and then to a ratio
“substantially lower than 110% by 2022,” IMF Managing Director,
Christine Lagarde said.
Investor attention is now likely to turn to Athens’ debt buy back
plan, which a senior Greek debt office official told MNI would likely
target E30 billion of outstanding debt held by hedge funds, foreign
banks and individual investors, with a price between 25% and 33% of the
bonds’ nominal value.
“Any tender or exchange prices are expected to be no higher than
those at the close on Friday, 23 November 2012,” the Eurogroup statement
said.
ECB President Mario Draghi, in a brief statement to reporters,
said, “I very much welcome the decisions taken by the ministers of
finance,” which he said would “help restore confidence” in the euro
area.
–Brussels Newsroom, +324-952-28374; pkoh@mni-news.com
[TOPICS: M$X$$$,M$Y$$$,MGX$$$,M$$CR$,MT$$$$]
