Europe Agrees On Greece
Eurozone finance ministers finally reached agreement on redesigning Greece’s aid plan. The news was announced by Eurogroup Chair Juncker and IMF MD Lagarde – without any eye-rolling or press conference theatrics on this occasion. Key points were largely in keeping with press leaks over the past week and so EURUSD quickly gave back all gains. There were several gestures of lenience. European governments will reduce the interest charged on bilateral loans to Greece by 100bp. Interest payments due on EFSF loans will be deferred by 10 years. The maturity of the loans will be doubled from 15 to 30 years. As expected, haircuts on bilateral loans to Greece were not part of this deal, even if they seem likely to happen eventually. Germany’s Finance Minister Schaeuble arguably nodded in this direction saying that further measures to reduce Greece’s debt burden will be considered once Greece has reached a primary surplus and fulfilled all conditions. Lastly, the next payment will be a bumper tranche worth EUR 43.7 bn and not the EUR 31.5 bn initially envisaged − essentially Europe will combine three due (or overdue) tranches into one. Now we await the ratification process at national government level.
Click here to read the full report: UBS Morning Adviser Europe
UBS Investment Bank