ESM proposes short term debt relief for Greece

ESM proposes short term debt relief for Greece

The European Stability Mechanism (ESM) proposes the reduction of Greek public debt by 21.8% as a percentage of GDP in 2060, which will be presented to the December 5th Eurogroup, says a report in the Wall Street Journal.

The report cites a six-page document of the ESM, dated November 25.

According to the publication, the ESM document describes measures that can be taken in the short term to reduce Greek debt, such as the extension of the time period and the “locking” of interest for certain loans to protect Greece from future interest rate increases.

These measures will be implemented from now until the end of the Greek program in mid-2018.

“This is a working document, which has not yet been approved by the finance ministers of the Eurozone. The document comes after the mandate given to the ESM (of finance ministers of the Eurozone) on May 25th where a first set of measures will be examined in the short term to improve the sustainability of Greek debt,” said the ESM spokesman.

He also noted that the CEO of ESM Klaus Regling will present his proposals to the Eurogroup meeting on December 5th. Eurozone officials expect that the proposals will be adopted in the Eurogroup, according to WSJ.

The ESM document proposes three sets of short-term measures, including the interest rate lock that Greece pays for certain current and future loans.

For this category there are measures such as an exchange of bonds with a floating interest held by Greek banks (as part of their recapitalization) with fixed rate bonds and use interest rates exchanges (swaps) to stabilize Greece’s payments for certain ESM loans.

They also include the granting of certain future funding in Greece with fixed rates.

Other measures referred to in the document concern the extension of the duration of certain loans to 32.5 years from 28.3 years.

Another measure provides for the lifting of an interest burden that Greece would be paying in 2017 in some of its loans, associated with old privatisation goals.

Removing the burden of 2018 will be seen in the context of medium-term debt-relief measures.

The ESM document points out that the final impact of these measures on debt relief, which has been estimated at 21.8 percentage points, will ultimately depend largely on market conditions./ΙΒΝΑ