Sunday, April 11, 2010

Greece Headlines from the weekend $NBG

Greece Headlines from the weekend
·         Greece Update – Eurozone governments have put together a loan package worth at least EU30B (US$41B) for Greece.  On Sunday, European finance ministers said they would offer Greece loans at 3-year interest rates of around 5% in case Greece requests the cash.  Luxembourg PM Junker told reporters on Sunday that “this is a step of clarification that markets are waiting for – it shows there is money behind this”.  A “loaded gun” to ward of speculators is now “on the table” according to Greece’s PM.  The agreement came about after Germany dropped its opposition to subsidies for Greece lending.  Greece has not requested the activation of this aid facility.  Bloomberg  

·         Takeaways on the IMF/EU loan terms for Greece from JPMorgan’s J Normand - The agreement prescribes the following: (1) bilateral loans from European governments for 3 years; (2) up to €30bn in EU lending for the first year, in addition to the IMF's contribution (presumably 10x Greek quota, or roughly €7.5bn); (3) lending rates near 5% calculated as 3-mo euribor plus 300bp spread plus 50bp for operational cost; (4) IMF loans priced according to their formula (currently 3.25% for a loan of 10x quota).  The Commission has not asked for additional fiscal measures/conditionality since Greece's program appears on track, judging from the March budget statement released last Thursday. The next Commission assessment of Greece's progress towards its targets is due May 15.   These terms are good but not great. The funds would cover all of Greece's remaining 2010 borrowing requirement (€30bn) but not 2011 redemptions (€22bn). Funding is almost 200bp lower than Greece's current 3-yr rate (6.98%), but is more expensive than IMF terms or weighted-average Euro area bond yields

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