Bruegel: Greece - where do we stand and what to watch

05 June 2015

Key points on Greek ongoing negotiations.

Redemptions postponed

Greece needs to repay about 1.5bn to the IMF in June, distributed as follows: 5 June: about EUR 300 mn on the 5th, EUR 335 mn on the 12th, EUR 558 mn on the 16th and EUR 335 mn on the 19th. Greece announced yesterday that it decided to bundle all this payments into a single tranche to be redeemed at the end of the month.


Negotiation will most likely be centred around the points of contention included in the two different proposals (one from the creditors and one from Greece) that have been leaked in the past days to the press and that are reviewed below.

Different proposals

The latest creditors’ proposal was leaked and published by a Greek paper, while the Greek counter-proposal was published by a German paper . There are some important elements on which numbers have been put on paper, and these are likely to be the catalyst for the negotiations during next week.

Restructuring plans

So,  to sum up. Greek negotiations will continue next week, after Greece asked to bundle all June IMF payments at the end of the month. In the meantime, the finding of a common ground between Greece and its creditors is not yet in sight. The primary surplus issue is where positions seem to have converged the most, with the creditors moving significantly closer to the Greek position. [...]

The negotiations over next week will be further complicated by the fact that the Greek proposal includes a section on the restructuring of its debt vis-à-vis the creditors. The details of the plan have been clarified in another leaked paper, which was published by the FT this morning. Many of the restructuring elements had been hinted at or heard before, during these months of negotiations: the plan would include (i) a buyback of the debt owed to the ECB with a ESM loan; (ii) IMF partial buyback with SMP profits; (iii) additional re profiling of the Greek Loan Facility; (iv) splitting EFSF loans in two and substitute half with a perpetuity.

None of these seems to be politically acceptable at the moment: IMF has previously appeared in favor of debt relief, provided it is done on the EU side of Greek debt; the GLF and EFSF terms have already been eased substantially and the perpetuity idea looks hardly digestible in Berlin; the ECB president Mario Draghi said yesterday that the ECB expects timely and full repayment of the SMP; and political support for the ECB/ESM swap idea looks elusive. Given the postponement of IMF payments, the hard deadline becomes the  redemption of debt due to the ECB in July. But for the agreement to be signed off nationally and money to be disbursed on time, a deal should be reached sooner. Time is running out, and options would start to look scarce, even to the most resourceful Ulysses.

Full article on Bruegel

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