This remains the tricky part, seems:

Several key issues remain outstanding, however:

1. The budgetary and reform milestones which need to be cleared in order for Greece to receive funding have yet to be hammered out with the lenders. The statement suggests that discussions will start tomorrow and may last weeks, potentially resulting in market volatility if there are disagreements.

2. Availability and drawdown conditions have yet to be decided. Specifically, the one reached over the weekend is a political agreement and each EMU government will now need to go seek legislative approval in Parliament. Related open questions include: Where will the loans rank with respect to other existing Greek debt? Where will these loans show up in the lenders’ books (i.e., will they increase the deficit and debt)? Will they require extra funding in the capital markets?

3. Most importantly, as Erik Nielsen has commented in a note this afternoon, the issue of medium term debt sustainability remains open. It will depend on measures and reforms put in place by the Greek authorities, the response of domestic activity, and the external economic environment.

Best Regards. FUG
Francesco U. Garzarelli

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