Creditors seek agreement to alleviate Greek debt burden
ATHENS: Greek bailout talks are reaching the final stretch and creditors are debating what relief measures they can offer Europe’s most-indebted state to ease its financial burden and facilitate its exit from the latest lifeline.
Negotiations over the type, size and conditions of likely debt relief have been contentious, though all parties want to reach a final agreement by Thursday, when euro-area finance ministers meet in Luxembourg.
Here’s what could be in store for Greece:
Maturity Extensions an extension of up to 15 years on some of Greece’s loans from the European Financial Stability Facility — the predecessor to the euro area’s bailout fund. The extension would only apply to as much as €96.4 billion (RM446.88 billion) in loans, and excludes those received bilaterally from euro-area countries and any outlays from the current programme. Central Bank Profits
Through its bond-buying securities and markets programme and the agreement on net financial assets, the European Central Bank (ECB) and euro-area central banks hold some €12.8 billion in Greek bonds, the profits from which are redistributed to euroarea governments. These profits from bond holdings, which will amount to around €4 billion until 2022, have been promised to Greece in order to help it ease its debt burden.
Debt Buyback
By the end of its bailout, Greece will have about €27.4 billion of unused loans from its latest €86 billion bailout. This means the country could use the cheap funds to repay early some of its more expensive loans that fall due sooner, such as €10.4 billion from the International Monetary Fund, €12.8 billion from the ECB and €52.9 billion from other euro-area Cash Buffer
As with other bailout countries, in order to facilitate Greece’s foray into financial markets, its creditors will give the country a final financial-aid tranche of between €11 billion and €12 billion to go towards its cash buffer — made up of loans and money raised on the markets — which is estimated to reach around €20 billion. Growth Adjustment
In order to bridge different assumptions about how the Greek economy will do over the next years — and, in turn, how much debt relief it needs in the medium term — a mechanism will be set Step-Up Margin
This measure entails permanently waiving an annual penalty on €11.3 billion of loans that were extended in 2012 to refinance a debt buyback operation then. Long-Term Commitment
If all these measures prove not to be enough to make Greece’s debt sustainable in the long run — the euro area is expected to also make a commitment to further assess the need for additional debt relief in the future in order to ensure the country’s financing needs are sustainable.