Greece and its European creditors brokered a grand bargain on further debt relief that sees Greece get the desired “clean exit” from its EUR86bn ESM program in exchange for accepting continued post-program surveillance. Together with the improving economic and fiscal outlook the deal should provide a good basis for Greece returning to financial markets on a sustainable basis in August. In addition to a credible upfront commitment to lighten Greece’s debt load via an extension of maturities and deferred interest on official loans, measures include a transfer of Eurozone central banks’ profits accrued on Greek bonds as well as the cancellation of an increase in the EFSF’s interest margin on one of the tranches. The latter two measures are conditional on Greece completing a series of reforms as well as meeting fiscal targets in the coming years – a primary surplus of +3.5% until 2022 and +2.2% until 2060 – with progress tracked in quarterly reviews. Meanwhile thanks to additional cash funds Greece’s cash buffer now stands at EUR24bn – equivalent to about 85% of sovereign financing needs until end-2020 – and should provide a sizeable backstop in the case of adverse market conditions.
