A tight contract for the loans

Our lenders are demanding written assurances from the Finance ministry and the Legal Council of State that the new loan agreement of 109 billion is not contrary to the Greek law - in order to avoid constitutional issues - and will never be countered with a law that will negate its validity in the future. The contract clearly specifies that the applicable law is the British one and the relevant dispute resolution courts are in Luxembourg.

Greece is obliged to inform the Troika at any time if there is any judicial or arbitral decision that creates obstacles against the implementation of the memorandum.

With the contract of 109 billion euros from EFSF, lenders stipulate that they are not lesser (or preceding) than any other lender in case of compensation. They want assurances, mainly including movable and immovable assets of banks (shares, deposits, etc.).

The EC, which is responsible for drawing up a contract, avoids talking openly about collateral in the form of state property. It also includes a term that the EFSF can send its own auditors.

And in the quarterly audits by the Troika, if our country fails to receive a tranche due to non-compliance with the memorandum, it will be charged a fine for each day of delaying to meet its obligations. It will also pay a fine, returning an amount calculated at 2% per annum (200 bps) of the last tranche it would have thus far received.

Initially the money of the loans will go into a special account at the Bank of Greece. Although this was agreed on for reasons of "national dignity" (instead of a fixed-term account in a foreign bank), there is a term in the contract that provides for the replacement of this account with another that may be deemed necessary in the future.

Of the 109 billion euros, only 61 billion are the new loan (24 bi. are remnants of the first memorandum and another 24 the money agreed on 1.3.2012 for the recapitalization of banks). Even so, the country will receive considerably less, as various expenses, costs and interest will be deducted from the total amount.

As pointed out since yesterday evening by protothema.gr, it is provided that for each disbursement our country must be consistent with all its obligations. If the opposite happens, the EFSF can cancel part of, or the entire loan and turn the amounts into overdue and immediately payable.

In cases of delays the contract provides for the increase of interest, while the amount of each tranche will first cover any arrears, fees or interest, and then the country's needs. The first installment will be released on March 19, to pay off bonds that end the next day.