Eventually they made it. The Eurogroup and the International Monetary Fund have finally reached an agreement on how to reduce the Greek debt over the next few years. The agreement will make it possible to unblock one soon new tranche of aid for 43,7 billion euro.
In its third meeting in three weeks, Athens' creditors concluded the negotiations at 1.30 this night, after a 13-hour discussion. The result is a package of measures that should reduce Greek debt to 124% of GDP in 2020 (no longer at 120%, the threshold established by the previous agreements and hitherto considered insurmountable by the IMF) and to a level “substantially lower” than 110% in 2022.
“We wanted Greece to get back on track in respecting its commitments and for Eurozone partners to take the necessary steps to put its public debt back on a sustainable trajectory,” he commented. Christine Lagarde, number one of the IMF -. We achieved all of this tonight."
Here are the planned actions:
1) Interest on bilateral loans already granted to Greece in May 2010 is being reduced by 100 basis points (or one percentage point), going from 150 to 50 basis points above interbank rates.
2) The cost of the commissions that Athens pays for the guarantees provided by the Eurozone countries to the EFSF bailout fund on loans already disbursed was reduced by 10 basis points.
3) The maturities of the bilateral loans will be postponed by 15 years, while the payment of interest on the EFSF loan will be deferred by 10 years.
4) The national central banks and the ECB are giving up the profits they made on Greek government bonds, bought under price in the midst of the financial storm but then repaid at their face value. The profits will be paid in Athens to the blocked account that Greece uses to repay creditors.
5) The "buyback" is also coming. Athens will be able to buy back a good portion of its government bonds on the market at decidedly depreciated values. Their nominal value will produce an equivalent reduction in public debt.
6) Under the heading of "additional assistance measures" there is a lower requirement for national co-financing of EU structural funds in cohesion policy projects, and/or possible additional reductions in the interest paid on EFSF loans.
All these measures are conditional on the return of the Greek budget to a primary surplus (net of interest on the debt). The expected share is equal to 4,5% of GDP, but as of 2016, no more than 2014.
As for the new ones aids, a political go-ahead came from yesterday's extraordinary Eurogroup, while the formal one is expected on December 13th. In these two weeks, the disbursement will be approved by the national parliaments in the countries where this step is required, especially Germany.
In detail, 10,6 billion euros will be paid to Greece within the next month to finance the budget, while others 23,8 billion will be used for the recapitalization of banks. The remaining 9,3 billion they will arrive in Athens in three installments in the first quarter of 2013, on the condition that the Antonis Samaras government implements a series of commitments undertaken with the Troika (EU, ECB and IMF). Among these, the most important is the tax reform, scheduled for January.
