Tuesday, November 27, 2012

Agreement on Greece Reached @ Eurogroup


An agreement between Greece’s lenders (the European Union, the International Monetary Fund and the European Central Bank) concerning the sustainability of the country’s public debt was reached, at a marathon Eurogroup meeting in Brussels, early this morning.Eurozone Finance Ministers agreed on a formula to reduce Greek debt to 124% of GDP by 2020.

Following 12 hours of deliberations, Eurozone Finance Ministers and the IMF agreed on a set of measures that would immediately cut Greece’s debt by 20% and then set it on a path that would see it drop below 110% of GDP by 2022.

According to a statement on Greece issued, the Euro area member states would be prepared to consider lowering by 100 bps the interest rate charged to Greece; lowering by 10 bps of the guarantee fee costs paid by Greece on the EFSF loans; an extension of the maturities of the bilateral and EFSF loans by 15 years and a deferral of interest payments of Greece on EFSF loans by 10 years.

The Eurogroup further stresses, 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.

The agreement thus, paves the way for the gradual disbursement of the next tranche of the bailout loan to Greece, with the first and largest installment, amounting to €34.4 billion (€10.6 billion for budgetary financing and €23.8 billion in EFSF bonds earmarked for bank recapitalization) to be paid out in December 2012.


The disbursement of the remaining amount (€9.3 billion) will be made in three sub-tranches during the first quarter of 2013.

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