All sides involved are close to a comprehensive agreement for Greece, including the creation of a cash reserve of around € 20 billion, debt relief, growth strategy, and post-memorandum supervision.
The above agreement is expected to be realised at the Eurogroup on June 21. Brussels believe that, once the 88 prerequisites of the latest assessment are met, Greece is ready to succeed in the ESM programme. However, they point out that the real “success” or “failure” of the exit will be determined by the policies to be followed in the country over the next two years.
In order to prepare for a “smooth” and “sustainable” exit of the country from the programme, Brussels place particular emphasis on the creation of a cash reserve of about € 20 billion. With this cash reserve it is estimated that Greece will be able to meet its debt obligations by the beginning of 2020 provided that the fiscal targets and primary surpluses are reached in 2019 and 2020.
A large part of the cash reserve will be disbursed with the last installment of loans, before the end of the programme, on August 20. This money will be pledged and used exclusively to serve the Greek debt.
What is planned as regards the debt
In relation to the debt, the package of so-called front-end measures concerns the extension of the repayment time of the EFSF’s loans and the use of part of ESM’s unspent money amounting to € 27 billion for the purchase of expensive loans, of the IMF’s € 12 billion.
The return of central banks’ profits from Greek bonds (SMPs) and ANFAs, is estimated at around € 4 billion and could be disbursed in four annual installments, provided that the agreed ones are respected.
As regards the post-memorandum era, Brussels are looking for ways to continue reforms in Greece in the years to come, in a way that will satisfy its markets and its partners in the Eurozone. After leaving the programme, Greece will be subject to the so-called “Enhanced Surveillance”. This means that there will be quarterly evaluations regarding the implementation of the agreement, by the institutions, as well as specific political commitments…. / IBNA