Mere weeks after the Merkel re-election, it will come as no surprise to anyone that Greece is to be bailed out for the third time. Germany's Die Zeit newspaper notes the government is assembling a Greek bailout plan which essentially has four gimmicks to fill the "high-single-digit-billion" budget shortfall. Despite having been told time and again that the worst is over, Greek Bailout III will entail shifting cash from the bank recap fund, Bill sales to specific banks which can be instantly collateralized with the ECB, possible extensions of credit by existing creditors, and reduction in interest rates on existing debt. Of course, we will be told that this is the last time and that Greece will emerge victorious in just 1 or 2 more years...but after a few weeks of epic strength, the Athens stock index is giving some back in the last 2 days.
Via Bloomberg,
German government is assembling Greek bailout plan involving shifting funds, ECB assistance, expanded credit and outstanding-debt reduction, Die Zeit newspaper reports, citing unidentified finance officials.
- Creditors to shift unused Greek bailout funds earmarked for bank recapitalization in current program to fill 4 bln euro funding gap
- Amount in current program could be topped off by funds raised in short-term government debt sale to private banks, which can use the bills as collateral through the ECB
- Creditors weighing additional financing to Greece to 2016 after current bailout ends next year; IMF program to end then
- "High single-digit billion’’ sum needed to finance Greece through beginning of 2016
- Creditors considering extending credit maturities and lowering interest rates to help Greece carry debt burden
Seems to us that if the bank recap fund is greatly rotated into government funding then all that hot money flows into Greek banks may be a little caught offside?