European finance ministers finally relaxed the terms on Greek bailout with international lenders, awarding Europe`s most debt-ridden country a big breathing space on Monday with long-frozen emergency fund to restart from December.
The euro zone and the International Monetary Fund agreed after 12 hours of talks in Brussels to unlock 43.7 billion euros to be delivered in stages starting in December as the nation fulfills the bailout demand.
The money would be paid in four tranches from December 13 through until the end of March. The first tranche of 34.4 billion should be out in December. It will comprise 23.8 billion euros for banks and 10.6 billion in budget aid.
Greece`s international lenders stroke a deal on a package of measures to reduce Greek debt by 40 billion euros through cutting it to 124 percent of gross domestic product over the next eight years.
Heavy talks between the ministers and international creditors intended to see Greece`s debt fall from an estimated 144 percent to 124 percent of the gross domestic product, and "substantially below 110 percent" of GDP by 2022.
Ministers also agreed to cut the interest rate on official loans by 100 bp, and lower guarantee fee costs paid by Greece on official loans by 10 bp, while to extend their maturity by 15 years to 30 years, and grant a deferral Greek interest-payment on official loans by 10 years.
Moreover, ministers promised to hand back 11 billion euros in profit accruing to their national central banks from European Central Bank purchases of discounted Greek government bonds in secondary market.
Despite the relaxed terms on cutting Greece`s long-term debt, creditors refused to accept a haircut on their loans. Ministers of finance also agreed to help Greece to buy back its own bonds from private investors.
The euro bounced up on the deal recording a fresh one-month high of $1.3007, but eased at the meantime to trade around $1.2992 areas.
The IMF saved the Greek day it seems, allowing the euro zone to raise the sustainability goal to 124 percent debt-to-GDP ratio in exchange for an agreement to reduce Greece`s debt to under 110 percent by 2020.
Nonetheless, analysts say the only way to reduce the debt ratio that low by through the next eight years is for the euro zone to write-off Greek loans, thus we will have to wait until 2016, the end of the IMF programme.
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