14 April 2010

EZA 942 Report: Greece

EZA Report 942/14Apr10 : Financial Details of Greek Support Package Agreed

Eurozone Finance Ministers, convening by teleconference on Sunday, 11 April, agreed on the principal financial terms to be attached to the joint Eurozone/IMF support package for Greece (see EZA938) that would be made available, were it to be activated, as follows:

·        in the first year of a 3-year programme, to be designed with and co-financed by the IMF, the euro area Member States would contribute up to €30 bn to a central pool managed by the European Commission ( to which the IMF would contribute a further € 15 bn);

·        additional support for years 2 and 3 is to be decided upon agreement of the programme now being worked out jointly by the Commission, the ECB, the IMF and the Greek authorities;

·        taking the IMF's pricing formula as a benchmark, variable-rate loans would be based on 3-month Euribor and fixed rate loans on Euribor swap rates for the corresponding maturities, with an additional charge of 300 basis points and a one-off service fee of up to50 basis points;

·        a further charge of 100 basis points would be applied to any amounts outstanding for more than 3 years.

Asset conclusions: the agreement helps Greek bonds find a floor value, which is substantially above the 09Apr low, but volatility is likely to remain, as markets will test the agreement. 5-year bonds currently offer the best value.

Please see the attached briefing note from John Arrowsmith and Michael Clauss; simply read onscreen or print and read at your convenience

Discussion Partners

John Arrowsmith: ECB / Regulatory

Tel: +44 7720 59 1726

john.arrowsmith@eurozoneadvisors.com

Dr Michael Clauss: Germany Politics / Economy / Equities Sectoral Analysis
Tel: +49 89 64254046

michael.clauss@eurozoneadvisors.com

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