Prior actions required for loan tranche disbursement

According to a press report (Kathimerini), ten prior actions are required for the Greece to the disbursement of the next loan tranche.

(1) revision of the privatizations programme; target revised to EUR10bn by 2016 and EUR25bn by 2020 from EUR50bn previously,

(2) tax reforms: appointment of auditors,

(3) new medium-term fiscal adjustment programme for 2013-2013 and voting of 2013 budget,

(4) labor reforms: revision of min wage,

(5) pension reforms,

(6) healthcare reforms: merger of insurance funds,

(7) healthcare spending cuts,

(8)  liberalization of legal profession,

(9) liberalization of fuel transportation market,

(10) liberalization of closed professions.

EC spokesman told reporters that “we are discussing with Greek authorities the last fiscal and structural measures on which we have to agree” adding that “we hope to conclude these discussions in the next days”. He also noted that there is no plan (at the moment) for an extraordinary Eurogroup, ahead of the scheduled on November 12 adding that “it can be called any time through a teleconference, if it is needed”.

Debt buy back

Press reports are insisting on the issue of a possible Greek debt buy-back program. This time around, a Der Spiegel article is suggesting that the German ministry of Finance is looking into the idea of having Greece borrow up to EUR 10bn from the ESM, which will be used to purchase an equivalent amount of Greek debt at market prices. The article is suggesting that EUR 40bn of notional could be purchased using these funds representing a possible EUR 30bn debt alleviation (16% of GDP), bringing the overall debt stock on a more sustainable path.

Timeline of important events

Following the conclusion of the EU Summit and in the run-up to the next loan tranche disbursement and potential extension of Greece’s fiscal adjustment program, we summarize the following timetable that is aired across press reports: Govt to submit EUR13.5bn measures package and 2013 budget for voting by 11th November, extraordinary Eurogroup meeting on 26th November (during which Eurozone finance ministers are to decide upon loan tranche), programmed Eurogroup meeting on 12th November and extraordinary EU Summit on 22nd November (possible decision of extension).

During an interview with Imerisia newspaper, FinMin Yannis Stournaras noted that Greece has covered 90% of what is required to secure the disbursement of the next tranche. Following a meeting with PM yesterday, FinMin told reporters that labor issues should be finalised in the next two days. Reportedly, the government is aiming to seal the agreement with the troika by Thursday, when the Euro Working Group meets. Same sources note that Eurozone officials will prepare an assessment on the Greek package ahead of an extraordinary Eurogroup to be held on October 26 or 29. Furthermore, the government will strive to pass the bills by the parliament before November 12, when Eurogroup will hold its scheduled (regular) meeting. Reportedly, the bills should be tabled to parliament by November 3, so they could be voted on by November 11 at the latest.

According to Kathimerini newspaper, the government hopes to convince eurozone to release September instalment of €5bn on top of the €31.5bn it was due to have been received last June. Same source indicates that out of the €31.5bn, €23bn will be used for bank recap and €5.5bn to cover maturing bonds, while the remaining €3bn would be kept as a cushion in case of delays in the disbursement of future tranches.

According to Der Spiegel, German MoF is considering a debt buy back as a possible way for Greece to reduce its debt. Same source noted that Greece could borrow money from EFSF and buy back its bonds, which are currently trading at 25% of their nominal value, meaning that with €10 Greece could buyback bonds with a nominal value of €40.


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