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Eurogroup: 3 Bailout Tranches in 4 Tranches; A Drop in the Ocean of €319 Bn Debt
After twelve hours of itching, Greece’s lenders, the EU/IMF/ECB agreed to save Greece for one more time and repel any danger for the Euro zone stability. A number of steps will cut the country’s debt to 124% of gross domestic product by 2020 and to 110% in 2022. However the Eurogroup finance ministers refused to accept IMF’s proposal for a new ‘haircut”. This could come in 2015, I read in several economic sites and international media.
Eurogroup/IMF decisions
1) extension of loan maturities
2) deferral of Greek interest payments on EFSF loans by 10 years. Cut to the interest rates Greece is paying on loans from its international partners: a) lower by 100 basis points the interest rate Greece is paying on its Greek Loan Facility–the loans it received on its first bailout package – from 2.5% to 0.75% . b) cutting interest rates even further once the country reached a primary surplus, currently projected to happen in 2014. This will help Greece to pay 600 million EUR less per year, 5 billion EUR in 8 years.
3) debt buyback
4) extension of bilateral and European Financial Stability Facility loans to Greece by 15 years
Bailout Tranches: total 43.7 billion euro for 2012
Eurogroup finance ministers will give the formal approval in Dec-13 meeting. The money will pass to Greece΄s segregated account.
1) EUR34.4 billion should be paid out by 13. December 2012. They will cover recapitalization of the banks and budgetary financing.
2) EUR 9.3 billion will be will be disbursed in three sub-tranches in the first quarter of 2013 (until March 2013) and will be ”linked to the implementation of agreed commitments” by Greece as set in the second bailout program, in March 2012. Precondition for the disbursement of these three tranches is the vote of the new taxation system in Greek Parliament set for January 2013.
Greece will receive the payments in four disbursements if formal approval is given by the eurogroup by Dec. 13. The formal sign-off will depend on national parliament approving the measures and will take place after a review of the benefits of a possible debt buyback.
Who Will Get the Bailout Money?
1) Bank recapitalization: 23.8 billion EUR
2) 10.6 billion budget financing
Outstanding state debts to private suppliers: a total of 9 billion EUR. Greek government will immediately pay 4 billion euro in December mainly to private suppliers of the health sector -medical supplies, medicine. The rest is expected to be paid by end of February.
3) Greek bonds buy back: 9 billion euro – essential for debt sustainability.
4) Primary deficit: 4.5 billion euro (wages, pensions)
5) Treasury bills: 3.4 billion euro
6) Bonds exempted from March-PSI: 500 million euro
All these obligations added together to a 50+ billion euro. But I guess, they will be covered by the bailout tranches due to 2013 as agreed in the second Memorandum of Understanding (MoU).
Eurogroup statement: Strict supervision
The Eurogroup recalls that a full staff-level agreement has been reached between Greece and the Troika on updated programme conditionality and that, according to the Troika, Greece has implemented all agreed prior actions.
The Eurogroup noted with satisfaction that the updated programme conditionality includes the adoption by Greece of new instruments to enhance the implementation of the programme, notably by means of correction mechanisms to safeguard the achievement of both fiscal and privatisation targets, and by stronger budgeting and monitoring rules. Greece has also significantly strengthened the segregated account for debt servicing. Greece will transfer all privatizations revenues, the targeted primary surpluses as well as 30% of the excess primary surplus to this account, to meet debt service payment on a quarterly forward-looking basis. Greece will also increase transparency and provide full ex ante and ex post information to the EFSF/ESM on transactions on the segregated account.
Money comes and goes
According to media reports, so far Greece has received 149 billion euro of EU/IMF bailout aid. In two loan agreements (MoU I/May 2010/110 billion EUR and MoU II/March 2012/130 billion EUR) Greece’s lenders agreed to borrow to the debt-ridden country a total of 240 billion euro. The country’s broke citizens will have to pay back the loaned capital plus interest rates.
National Greek Debt as of 26. Nov 2012 at 1:50 p.m.
319,620,260,429€
Source: Greek Government Data /Comment: Excludes the pending 34bn Euro (£27bn / $44bn) December 2012 and the 9.3bn 2013 EU/IMF Loans
Each Greek citizen owes to EU/IMF/ECB a total of 28,260€.
Due to interest rates alone, each Greek (whether newborn or age-old) of a population of 11,309,885 has a debt of 15,000 euro.
Interesting Facts
- You could wrap $1 bills around the Earth 1,586 times with the debt amount!
- If you lay $1 bills on top of each other they would make a pile 44,491 km, or 27,645 miles high!
- That’s equivalent to 0.12 trips to the Moon! (debt clock)
Where the bailout money goes is a miracle!
sources: several Greek and international media. For more details, google ‘greece eurogroup’
PS I don’t want to think how many new austerity packages will be needed until 2020.
2012-11-27 20:20:52
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