- Loan would cover Greek financing needs until end of November
- Bloc’s finance chiefs discuss disbursement in Brussels Tuesday
Greece’s European creditors are preparing to disburse 11 billion euros ($12.3 billion) once the nation successfully completes a review of its bailout program.
The funds will be used to clear arrears and to cover debt servicing needs, including a 2.3 billion-euro payment scheduled to the European Central Bank in July, according to a draft of the European Commission’s compliance report for the Greek economic program seen by Bloomberg News.
Greece’s creditors, including the commission and the International Monetary Fund, are trying to complete an assessment of the nation’s third bailout program, which was agreed upon last year and provides for as much as 86 billion euros in aid. Fulfillment of the evaluation would also allow for Greece to negotiate ways to ease the burden of its 321 billion euros of obligations.
The bailout program “is broadly on track, paving the way for the next disbursement to Greece,” the report says.
Euro-area finance ministers meet in Brussels on Tuesday to decide on the review and to weigh debt-relief proposals. European creditors remain at loggerheads with the IMF on how to alleviate Greece’s loan obligations, with euro-area states, led by Germany, resisting calls from the Washington-based fund to set less ambitious fiscal targets and hand Athens more generous repayment terms on its bailout loans.
Greece’s 10-year bonds were headed for their highest close in six months after lawmakers passed additional austerity measures Sunday night. Greece’s 1.5 billion euros of 3 percent notes due 2026 rose 1.27 cents to 75.8 cents on the euro at 12:15 p.m. in Athens. That would be the highest closing level since Nov. 19. The Athens Stock Exchange rose as much as 1.9 percent.
The compliance report signals that the 11 billion euros would cover the debt-ravaged nation’s financing needs until the end of November, with 3.8 billion euros being used to clear arrears and 7.2 billion euros servicing debt.
Greek lawmakers on Sunday approved additional austerity measures required to unlock the latest loan. After legislating fiscal measures equal to 1.7 percent of Greek gross domestic product last summer, coalition lawmakers needed to approve another 3 percent of GDP in tax hikes and pension cuts this month, as well as an additional 2 percent of GDP in measures that will only be triggered if the country misses certain budget targets.
While Greece’s fundamentals have changed little since the commission’s last proposal on May 9, the assumptions in the latest report, dated May 21, have become more optimistic. The commission foresees lower bailout financing needs and higher privatization revenues for Greece, which would lead to a slightly lower public debt ratio in the next decades. The document predicts Greece achieving and maintaining a budget surplus before interest payments of over 1.5 percent of GDP through 2040, an assumption the IMF has said is a “far-fetched fantasy”.
“An appropriate and phased combination of debt management measures (including locking in of current low levels of interest rates), extension of maturities and grace periods for principals and interest,” in addition to other profit mechanism would allow Greece to bring its debt to a sustainable level, the commission staff said in the report.