The rescue

Wednesday, February 22, 2012

Greece has been granted a second, (euro) 130 billion ($14.8 trillion) bailout package and a (euro) 107 billion debt relief deal with private creditors, in exchange for tough austerity measures and other concessions.

Here are the main points of the deals.

Bailout package:

:: (euro) 30 billion as a one-off payment to Greece's private sector creditors to get them to participate in a bond swap deal, described below. That figure assumes full participation.

:: (euro) 40 billion for the Greek government to use to rescue its banking sector, which risks collapsing under the weight of losses incurred in the bond swap. About (euro) 10 billion of that sum is carried over from Greece's first bailout.

:: (euro) 60 billion to be used to finance national debt.

:: Aims to bring the debt load to 120.5 per cent of GDP by 2020, from about 160 per cent currently.

:: The European Central Bank and national central banks in the eurozone will forgo profits on their Greek bond holdings.

Bond swap:

:: Private sector creditors, including Greek and foreign banks, pension funds and investment groups, will agree to voluntarily swap their existing Greek bonds with new ones worth 53.5 percent less in face value, and with a longer repayment period and lower interest rate.

:: Private creditors are estimated to take total losses of more than 70 percent on their Greek bond holdings, according to their representatives.

:: The deal will cut off about (euro) 107 billion ($142 billion) from (euro) 206 billion ($273 billion) Greece owes private creditors.

:: Private creditors will exchange the Greek government bonds for a payment of (euro) 30 billion ($40 billion) from the bailout package, plus (euro) 70 billion ($93 billion) in new bonds.

:: The interest rates on the new bonds will range from 2 percent to 4.3 percent between now and 2042.

Concessions from Athens:

:: Austerity reforms worth (euro) 2.5 billion ($3.3 billion), including cuts to the military budget, subsidies to remote islands, public investment and pension funds and subsidies.

:: Greece will have an escrow account to make sure that new bailout funds are earmarked for repaying debt ahead of other government spending.

:: Greece will introduce legislation that ensures servicing its debt is made a priority.

:: The leaders of Greece's two biggest parties gave written commitments to uphold the terms of the bailout deals even after general elections, which is tentatively set for April.