BRUSSELS (MNI) – The Eurogroup of euro area finance ministers early
Tuesday morning issued the following statement detailing the dual
agreements reached with the Greek government for a new package of
bailout loans from official sector creditors and an exchange/reduction
of debt held by the private sector:

“The Eurogroup welcomes the agreement reached with the Greek
government on a policy package that constitutes the basis for the
successor programme. We also welcome the approval of the policy package
by the Greek parliament, the identification of additional structural
expenditure reductions of E325 million to close the fiscal gap in 2012
and the provision of assurances by the leaders of the two coalition
parties regarding the implementation of the programme beyond the
forthcoming general elections.

This new programme provides a comprehensive blueprint for putting
the public finances and the economy of Greece back on a sustainable
footing and hence for safeguarding financial stability in Greece and in
the euro area as a whole. The Eurogroup is fully aware of the
significant efforts already made by the Greek citizens but also
underlines that further major efforts by the Greek society are needed to
return the economy to a sustainable growth path.

Ensuring debt sustainability and restoring competitiveness are the
main goals of the new programme. Its success hinges critically on its
thorough implementation by Greece. This implies that Greece must achieve
the ambitious but realistic fiscal consolidation targets so as to return
to a primary surplus as from 2013, carry out fully the privatisation
plans and implement the bold structural reform agenda, in both the
labour market and product and service markets, in order to promote
competitiveness, employment and sustainable growth.

To this end, we deem essential a further strengthening of Greece’s
institutional capacity. We therefore invite the Commission to
significantly strengthen its Task Force for Greece, in particular
through an enhanced and permanent presence on the ground in Greece, in
order to bolster its capacity to provide and coordinate technical
assistance. Euro area Member States stand ready to provide experts to be
integrated into the Task Force.

The Eurogroup also welcomes the stronger on site-monitoring
capacity by the Commission to work in close and continuous cooperation
with the Greek government in order to assist the Troika in assessing the
conformity of measures that will be taken by the Greek government,
thereby ensuring the timely and full implementation of the programme.
The Eurogroup also welcomes Greece’s intention to put in place a
mechanism that allows better tracing and monitoring of the official
borrowing and internally-generated funds destined to service Greece’s
debt by, under monitoring of the troika, paying an amount corresponding
to the coming quarter’s debt service directly to a segregated account of
Greece’s paying agent.

Finally, the Eurogroup in this context welcomes the intention of
the Greek authorities to introduce over the next two months in the Greek
legal framework a provision ensuring that priority is granted to debt
servicing payments. This provision will be introduced in the Greek
constitution as soon as possible.

The Eurogroup acknowledges the common understanding that has been
reached between the Greek authorities and the private sector on the
general terms of the PSI exchange offer, covering all private sector
bondholders. This common understanding provides for a nominal haircut
amounting to 53.5%. The Eurogroup considers that this agreement
constitutes an appropriate basis for launching the invitation for the
exchange to holders of Greek government bonds (PSI). A successful PSI
operation is a necessary condition for a successor programme. The
Eurogroup looks forward to a high participation of private creditors in
the debt exchange, which should deliver a significant positive
contribution to Greece’s debt sustainability.

The Eurogroup considers that the necessary elements are now in
place for Member States to carry out the relevant national procedures to
allow for the provision by EFSF of (i) a buy back scheme for Greek
marketable debt instruments for Eurosystem monetary policy operations,
(ii) the euro area’s contribution to the PSI exercise, (iii) the
repayment of accrued interest on Greek government bonds, and (iv) the
residual (post PSI) financing for the second Greek adjustment programme,
including the necessary financing for recapitalisation of Greek banks in
case of financial stability concerns.

The Eurogroup takes note that the Eurosystem (ECB and NCBs)
holdings of Greek government bonds have been held for public policy
purposes. The Eurogroup takes note that the income generated by the
Eurosystem holdings of Greek Government bonds will contribute to the
profit of the ECB and of the NCBs. The ECB’s profit will be disbursed to
the NCBs, in line with the ECB’s statutory profit distribution rules.
The NCBs’ profits will be disbursed to euro area Member States in line
with the NCBs’ statutory profit distribution rules.

— The Eurogroup has agreed that certain government revenues that
emanate from the SMP profits disbursed by NCBs may be allocated by
Member States to further improving the sustainability of Greece’s public
debt. All Member States have agreed to an additional retroactive
lowering of the interest rates of the Greek Loan Facility so that the
margin amounts to 150 basis points. There will be no additional
compensation for higher funding costs. This will bring down the
debt-to-GDP ratio in 2020 by 2.8pp and lower financing needs by around
1.4 billion euro over the programme period. National procedures for the
ratification of this amendment to the Greek Loan Facility Agreement need
to be urgently initiated so that it can enter into force as soon as
possible.

— Furthermore, governments of Member States where central banks
currently hold Greek government bonds in their investment portfolio
commit to pass on to Greece an amount equal to any future income
accruing to their national central bank stemming from this portfolio
until 2020. These income flows would be expected to help reducing the
Greek debt ratio by 1.8pp by 2020 and are estimated to lower the
financing needs over the programme period by approximately 1.8 bn euro.
The respective contributions from the private and the official sector
should ensure that Greece’s public debt ratio is brought on a downward
path reaching 120.5% of GDP by 2020. On this basis, and provided policy
conditionality under the programme is met on an ongoing basis, the
Eurogroup confirms that euro area Member States stand ready to provide,
through the EFSF and with the expectation that the IMF will make a
significant contribution, additional official programme of up to 130
billion euro until 2014.

It is understood that the disbursements for the PSI operation and
the final decision to approve the guarantees for the second programme
are subject to a successful PSI operation and confirmation, by the
Eurogroup on the basis of an assessment by the Troika, of the legal
implementation by Greece of the agreed prior actions. The official
sector will decide on the precise amount of financial assistance to be
provided in the context of the second Greek programme in early March,
once the results of PSI are known and the prior actions have been
implemented.

We reiterate our commitment to provide adequate support to Greece
during the life of the programme and beyond until it has regained market
access, provided that Greece fully complies with the requirements and
objectives of the adjustment programme.”

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