EU Reach Bailout Deal With Greece Once Again

Update: it appears there isn't really a deal, but merely a can kicking. As the WSJ adds, the Greek "agreement" merely unlocks a key disbursement of bailout fund but puts a decision on debt relief off until next year. Specifically, the agreement reached in Luxembourg among the finance ministers of the eurozone unlocks €8.5 billion for Greece and puts off a final decision on debt relief until August of next year.

In other words, Europe agrees to pay Greece so Greece can then turn around and repay Europe the July €7 billion debt payment; meanwhile no firm, long-term deal has been reached.

As the WSJ put its, "the creditors’ refusal to lighten the burden of Greece’s crushing debt reflects a mix of mistrust and indifference that leaves the depleted country with bleak prospects for the future and at risk of needing yet another bailout."

* * *

As expected by most (if not all, judging by the 8 year lows in Greek bond yields), European finance ministers have reportedly reached an agreement to bail out Greece once again (provide them with yet another EUR8.5 billion loan), and agreed to discuss the possibility of debt extensions.

Blomberg reports that Euro area finance ministers reached an agreement paving the way for the disbursement of the next tranche of emergency loans, setting out terms of potential debt relief measures, two people familiar with the matter say.

Euro-area finance ministers approved a payout of 8.5 billion euros for Greece, according Luxembourg Finance Minister Pierre Gramegna.

Euro-area finance ministers are mulling a possible extension of the maturities on some Greek loans by 0 to 15 years, according to a draft statement seen by Bloomberg, even though it was not immediately clear what a 0 year maturity extension represents. The preliminary draft includes a proposal to defer the interest and amortization on Greece’s EFSF loans by the same duration

And yes, holdout IMF which threatened for two years it would not participate in a Greek deal absent a debt reduction is now in: as Christine Lagarde said: “I'd like to announce my intention to propose to the IMF’s Board the approval in principle of a new IMF Stand-By Arrangement for Greece."

The only potential risk factor: Greece commits to keeping a primary surplus of 3.5% until 2022 and that Greek Gross financing needs should be below 15% of GDP in the medium term, and below 20% afterwards to ensure debt stays on a downward path.

Finally:

  • DEBT RELIEF GREEK FOR GREECE WOULD BE GRANTED AFTER BAILOUT ENDS WITH SUCCESS IN 2018 - STATEMENT

and

  • DIJSSELBLOEM: GREEK DEBT MEASURES TO BE IMPLEMENTED AFTER 2018

In other words, if Greece does not reneg for the next 18 months, it may get another debt maturity extension, resetting the clock all over again.

Priced In?  Was the deal ever in doubt.

This deal puts an end any uncertainty about the possibility of Greece defaulting on over EUR7 billion in debt repayments due next month.

So the question is - who exactly are the EU finmins bailing out?

And another question: will Greek debt finally be eligible for ECB QE? With Mario Draghi running out of German debt to buy, this could provide with the central banks with a loophole to extend QE by at least a few months.

Comments

katagorikal OverTheHedge Fri, 06/16/2017 - 07:29 Permalink

Tomorrow and tomorrow and tomorrowGreeks in this petty pace from payday to paydayTo the last Syriza of recorded dime;And all our yesterdays have kick'ed cansdown the road to dusty death. Out, out, brief credit!Greece is but a walking bankrupt, a poor repayer,That cuts and debts its hour upon the stage,And then is no more. It is a taletold by a Troika, full of unsound moneydignifying nothing. 

In reply to by OverTheHedge

katagorikal Bad Goy Fri, 06/16/2017 - 06:50 Permalink

In buying a vacation home you are not competing with Greeks, but with N.Europeans, so the price of those villas reflects the economic conditions in N.Europe, not Greece. And as they have kept the Euro, there is no exchange rate friction. Even if they came out of the Euro, vacation homes would still be effectively priced in Euros, with small admixture of GBP/SEK/NOK/RUB in the basket (i.e. see huge nominal price rises if a new Drachma was devalued). 

In reply to by Bad Goy

Glyndwr will return Thu, 06/15/2017 - 14:57 Permalink

That money , like all other loans , would be money printed out of sheer thin air. How kind. I would like to do that actually. I would like to print money out thin air and charge interest on it in the full knowledge that the debtor cannot pay, so I will have their assets down the road. NOT! Bankers are the worlds scum. When will people wake up to that fact?

decentraliseds… Thu, 06/15/2017 - 14:59 Permalink

 Almost all the world’s economic and political problems revolve around the hegemony of a global corporate cartel, which is headquartered in the US because this is where their dominant military force resides. The US Constitution is therefore the “kingpin” of an all-inclusive global financial empire. These fictitious entities now own the USA and command its military infrastructure by virtue of the Federal Reserve Corporation, regulatory capture, MSM propaganda, and congressional lobbying. The Founders had to fight a bloody Revolutionary War to win our right to incorporate as a nation – the USA. But then, for whatever reason, our Founders granted the greediest businessmen among them unrestricted corporate charters with enough potential capital & power to compete with the individual states, smaller sovereign nations, and eventually to buy out the USA itself. The only way The People can regain our sovereignty as a constitutional republic now is to severely curtail the privileges of any corporation doing business here. To remain sovereign we have to stop granting corporate charters to just any “suit” that comes along without fulfilling a defined social value in return. The "Divine Right Of Kings” should not apply to fictitious entities just because they are “Too Big To Fail”. We can't afford to privatize our Treasury to transnational banks anymore. Government must be held responsible only to the electorate, not fictitious entities; and banks must be held responsible to the government if we are ever to restore sanity, much less prosperity, to the world. It was a loophole in our Constitution that allowed corporate charters to be so easily obtained that a swamp of corruption inevitably flooded our entire economic system. It is a swamp that can't be drained at this point because the Constitution doesn’t provide a drain. This 28th amendment is intended to install that drain so Congress can pull the plug ASAP. As a matter of political practicality we must rely on the Article 5 option to do this, for which the electorate will need overwhelming consensus beforehand. Seriously; an Article 5 Constitutional Convention is rapidly becoming our only sensible option. This is what I think it will take to save the world; and nobody gets hurt: 28th Amendment 28th Amendment: Corporations are not persons in any sense of the word and shall be granted only those rights and privileges that Congress deems necessary for the well-being of the People. Congress shall provide legislation defining the terms and conditions of corporate charters according to their purpose; which shall include, but are not limited to: 1, prohibitions against any corporation; a, owning another corporation; b, becoming economically indispensable or monopolistic; or c, otherwise distorting the general economy; 2, prohibitions against any form of interference in the affairs of; a, government, b, education, c, news media; or d, healthcare, and 3, provisions for; a, the auditing of standardized, current, and transparent account books; b, the establishment of state and municipal banking; and c, civil and criminal penalties to be suffered by corporate executives for violation of the terms of a corporate charter.    

True Contrarian Thu, 06/15/2017 - 15:02 Permalink

Just like maxing out on a credit card, the obvious solution is to just get another credit card. Simples.No need to worry about things like the exponential function in LaLaLand.

taketheredpill Thu, 06/15/2017 - 15:03 Permalink

  Greek Labor Force was 5 Million until 2013, when it fell to around 4.8 Million and has gone nowhere since.  Assume drop in Youth labor force was even worse i.e. drop in Youth Unemployment may be due to Discouraged Workers not being counted anymore.

Conax Thu, 06/15/2017 - 15:17 Permalink

The EU has bailed out itself.If the Greeks were to abandon the EU and default several other countries in similar trouble would probably do the same. End of the EU.

PontifexMaximus Thu, 06/15/2017 - 15:20 Permalink

I really never understood why even for a second, comments about greece re debt and blablabla are made, never. Never ever write about greece and debt etc. It is all settled, forever to eternity. So, do not bother me anymore with this bs. Who the hell cares about greece? Not even wolfi.

BSHJ Thu, 06/15/2017 - 15:52 Permalink

Ahhh...remember the exciting days in the 'markets' when everyone held their collective breath over the fate of Greece and the 'emergency of the day' that the whole financial world hinged upon? 

World Cash Day Thu, 06/15/2017 - 21:28 Permalink

TRUMP - SPEAK UP YOU CHUMP.TELL YOUR ORANGE FELLOW-TRAVELER LAGARDE TO GO AND TAKE A RUNNING JUMP.If someone in Trump's Inner Circle wises up (HELLO BANNON) - this shitshow can be ended.PULL THE IMF OUT OF ANY NEW GREEK DEBT AGREEMENT.