An agreement has been reached on a new three-year ESM financial assistance programme for Greece, integrated by a bridge loan to cover immediate financial needs……<\/p>\n
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Sign up for our free newsletter to receive weekly news from BONDWorld. Click here to register for your free copy<\/strong><\/span><\/a> <\/strong><\/span><\/a><\/span><\/p>\n Intesa Sanpaolo – Research Department For professional investors and advisers only<\/strong><\/p>\n The programme imposes the achievement of a primary surplus in the next few years, and on the whole will have a cooling effect on economic activity. However, the negative impact will be initially balanced by a gradual return to normal of the payment system, by the unfreezing of public spending, and by the recovery of capital inflows.<\/p>\n Tensions on Greece are easing, in the wake of the agreement reached between the Greek government and the Eurogroup to start negotiations on a new ESM financial assistance programme. On Monday, a package of pre-emptive measures was agreed on, that will have to be approved in part by 15 July, and in part by 22 July, and which essentially consist of a cancellation of the second programme’s arrears, and in a series of fiscal measures that more or less replicate those rejected by Greece in June. The Athens parliament approved the first package of measures with a wide majority, as the ‘No’ vote of 32 Syriza MPs was outbalanced by the support coming from the centre-left and centre-right opposition parties. As a result, the Eurogroup has formally initiated the procedure to negotiate a Memorandum of Understanding and a financial assistance programme under the ESM, which could include aloan of around 50 billion euros. The vote of the ESM board should come by the end of this week, once several ministers will have been authorised by their parliaments, and no hitches are expected. As it could take as long as a month to complete negotiations, in the meantime Greece will receive a 7 billion euro bridge-loan from the European Union, through the EFSM, which will be used to cover debt reaching maturity in the next few weeks, starting with the repayment of bonds maturing on 20 July. The other positive consequence of the agreement is the expansion of the ELA facility by 0.9 billion euros, announced yesterday by the ECB, which could allow banks to open again, albeit limitedly, on Monday. Restrictions on capital movements will in any case stay in place.<\/p>\n In an ideal scenario, the reform-for-credit agreement would be integrated by the spring of 2016 by an agreement on a new restructuring of debt, probably by means of a considerable extension of the grace period and of the amortisation plan. Furthermore, this would seem to be a necessary step to guarantee the IMF’s participation in the third bailout programme. The negative impact of austerity measures, on the other hand, will be in part and temporarily balanced by the reactivation of the banking system, the recovery of tourism (which was at risk of collapse between July and September), and the unfreezing of public spending (between January and June, primary current spending fell short of the budget amount by a hefty 2.6 billion, on top of which with 1.05 billion in capital account spending shortfalls, already financed by European transfers, should also be calculated).<\/p>\n However, three years may not suffice to restore the financial independence of Greece, considering the damage to confidence caused by the events of the past six months. The progress of the programme will in any case be challenging. The Greek government’s pro-euro choice was hard to digest and has split the Prime Minister’s party. A cabinet reshuffle is expected in the next week, with the exit of some of the ministers who voted against the deal, and who, such as former Finance Minister Varoufakis, were in favour of leaving the monetary union. For the time being, the likeliest outcome is that Tsipras will decide not to change the majority and to rely on external support from other parties to pass the measures rejected by the radical faction of Syriza. This scenario would lead to new elections in the autumn, to renew the government’s mandate. The implementation of austerity measures, and the electoral campaign could result in a resurgence of tensions with creditors. These also include countries that are in favour of Grexit, and which are ready to pounce on any faux pas by the Athens government to question the entire process again.<\/p>\n Appendix Important Disclosures<\/strong> Source: BONDWorld.ch<\/p>\n","protected":false},"excerpt":{"rendered":" An agreement has been reached on a new three-year ESM financial assistance programme for Greece, integrated by a bridge loan to cover immediate financial needs……<\/p>\n","protected":false},"author":2,"featured_media":3643,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"telegram_tosend":false,"telegram_tosend_message":"","telegram_tosend_target":0,"footnotes":"","_wpscp_schedule_draft_date":"","_wpscp_schedule_republish_date":"","_wpscppro_advance_schedule":false,"_wpscppro_advance_schedule_date":"","_wpscppro_dont_share_socialmedia":false,"_wpscppro_custom_social_share_image":0,"_facebook_share_type":"","_twitter_share_type":"","_linkedin_share_type":"","_pinterest_share_type":"","_linkedin_share_type_page":"","_instagram_share_type":"","_medium_share_type":"","_threads_share_type":"","_google_business_share_type":"","_selected_social_profile":[],"_wpsp_enable_custom_social_template":false,"_wpsp_social_scheduling":{"enabled":false,"datetime":null,"platforms":[],"status":"template_only","dateOption":"today","timeOption":"now","customDays":"","customHours":"","customDate":"","customTime":"","schedulingType":"absolute"},"_wpsp_active_default_template":true},"categories":[50],"tags":[],"class_list":["post-1711","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-weekly-analysis"],"blocksy_meta":{"styles_descriptor":{"styles":{"desktop":"","tablet":"","mobile":""},"google_fonts":[],"version":6}},"_links":{"self":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts\/1711","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/comments?post=1711"}],"version-history":[{"count":0,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts\/1711\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/media\/3643"}],"wp:attachment":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/media?parent=1711"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/categories?post=1711"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/tags?post=1711"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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