The negotiation for the further alleviation of the Greek debt is in the final mile. There are less than 2 weeks left until the final “solution” is put down to paper; a conclusive solution according to which the post-bailout Greece will walk.
Most likely, this agreement will not be signed by the IMF, as the Fund is expected to hold the role of a technical advisor. However, the Greek side is optimistic about the prospects for a debt relief agreement in June that will make its post-memorandum return to the bond markets credible alongside EU supervision and a cash cushion.
The non-activation of the Fund in the Greek programme automatically raises the ESM’s 12 billion lent to Greece, with the latter gaining at least 2 percentage points in the interest rate, and thus its presence in the country can be confined to a yearly evaluation report, which will not play a major role, as was the case in Portugal. In any case, it has been clarified that the Fund will retain the role of the technical adviser in Greece, which will reduce its ability to intervene, obviously, but will not cease to exist in the country. It seems that this would give an even greater degree of freedom to the government not to implement the measures for which it has committed itself because of its presence so far in the Greek programme and this is a powerful motivation.
On the other hand, some analysts argue that the active stay of the Fund in Greece would send a signal to the markets that the Greek debt is becoming more viable. All sides help to ensure that the decision will be such as to cover markets, and the Fund will proceed with a “good” analysis of the sustainability of the Greek debt, since there will no longer be any debt to it.
In order to make Greek debt sustainable, a one-off extension of the repayment time for EFSF loans should be provided, reaching 131 billion to satisfy the markets as well. Germany, allegedly, insisted on a 5-year lengthening, while on the other side it was under pressure for a 10-year lengthening, which if achieved implies that it will be a positive new one…. / IBNA