Rough bargain for the fine print of the extension

The terms, the “hot” bargaining for the extension and the rates of the 110 bil. to Greece, will be put on the table of the council of the European Finance ministers today. The reactions by the Eurozone members to the letters of Papakonstantinou about more control on the Rating Firms, which are threatening our country with another downgrade, are still unknown.

The bargain for the details and the “fine print” will peak before the summit on March 25, as there will be 2 Eurogroup councils, one today and one within the next week.

As Papakonstantinou said to the cabinet, by the end of March the government must come up with a 50 bil. plan for the privatizations which, although not included in the memorandum, were “written in” in the final text of conclusions at the informal summit on Friday.

In addition, under the current memorandum, the government must present the austerity measures of the 2012-2014 period by the end of March.

In any case, the Brussels agreement last Friday creates new facts about the debt against which the country is fighting. The unloading of about 6 billion, however, does not necessarily mean fewer new measures for businesses and households, although it is sending a message of calm to the markets. But even now, foreign rating firms insist on threatening to downgrade the Greek economy.
 
Our bill

Greece, unlike Ireland, received a 1% rate decrease. This is for all the loan installments, including those of 2010, and it means that our country will now be paying:

* a variable rate of 4,02%
* or a stable one at 4,2% instead of 5,2% for the EU loan
* against the 3,26% of the IMF loan
* 3.2 billion in interest, instead of 4 billion a year to the partners and the European Central Bank.

In other words, it will be saving 800 mil. euros a year, which is the exact amount the state will receive after the VAT raise from 11% to 13%, or twice that of the heating oil tax increase prepared for October.

In addition to the extension and the rate decrease, our country secured the possibility of future loans. As the PM stated at the cabinet meeting, the rescue funds will be able to buy state bonds directly from the issuing countries. So, the “piggy bank” will reach 440 mil. by 2013 and 500 mil. right after.

This is within the context of the measures of the new pact for the Euro, but also the «legally» specific obligation undertaken by the government to reduce the debt by 1/20 per year, in order to reach 60% of the GDP in about 20 years.

The 124-billion burden for 2012

Nevertheless, in light of these facts, Papakonstantinou presented yesterday the plan to refinance the 124 bil. debt, which expires in 2012.

Our loan needs for 2011 are 58 bil. euros and are covered by the mechanism and the issuing of interest bonds.
Our needs for 2012 will be 66 bil euros:

* 24 bil. will come from the support mechanism
* 2 bil. from the usage of state property
* 13 bil. from state bonds
* 27 bil. from primary market bonds.

If the market does not open for Greece, we will turn to the European Mechanism for the 27 bil.  

Despite all this, after the downgrade by Moody’s, Standard and Poors also announced they might act likewise, if they realize that after 2013 bond owners will lose money in case of a debt restructure.

At the same time, however, Greece is preparing to provide the first diaspora bonds, starting this spring with about half a bil. dollars from the US and continuing with Canada, Australia and Europe.