The three exit scenarios of Greece in the markets

The three exit scenarios of Greece in the markets

Three are the scenarios for Greece’s exit to markets in 2019, as published by the Public Debt Management Agency (PDMA). The program of the PDMA includes three alternative scenarios, with issuance of bonds of EUR 3, EUR 5 or EUR 7 billion. Depending on the scenario, it is projected that resources of EUR 1.1 billion, EUR 2.4 billion or EUR 5 billion will be used from the liquidity pillow. The Finance Ministry preferred, as expected, to have freedom of choice depending on the circumstances, as conditions change.

According to the figures provided by the PDMA, the financing needs of 2019 are EUR 9.2 billion. The amount is derived from bond maturities of EUR 11 billion, plus interest payments of EUR 5.6 billion, minus the primary surplus, which is projected to be EUR 7.4 billion.

The odds

These needs are covered as follows, depending on the scenarios:

  • Scenario 1: Bond issuance of EUR 3 billion, use of EUR 5 billion of cash reserves and reimbursement of the profits of European central banks SMPs and ANFAs, worth EUR 1.2 billion.
  • Scenario 2: Bond issuance of EUR 5 billion, use of EUR 2.4 billion of cash reserves, return of SMPs and ANFAs of EUR 1.2 billion, and privatization revenues of EUR 1.4 billion. In total, revenue of EUR 10 billion is are secured, which is why a 0.8 billion-euro reduction in interest rates is expected.
  • Scenario 3: Bond issuance of EUR 7 billion, use of EUR 1.1 billion of cash reserves, reimbursement of SMPs and ANFAs worth EUR 1.2 billion, and privatization revenue of EUR 1.4 billion. A total of EUR 10.7 billion of revenue is secured, with a predicted reduction of treasury bills by EUR 1.5 billion.

In the first scenario, in addition to a very limited return to the markets, no privatization revenues are foreseen. However, the PDMA stands for scenarios 2 and 3.

According to the PDMA, the amount of the Greek government’s cash reserves as of 30 September 2018 was EUR 26.5 billion. It is equivalent to the gross financing needs of two years and the debt maturities of four years./IBNA