EU summit: Seeing is believing

After a week-end of negotiations ending with the Euro summit to discuss Greece’s request for a third bailout, there was an agreement to start negotiations again. Greece’s official creditors have agreed to disburse funds immediately to Greece to avoid defaulting with the ECB-owned debt and to settle arrears with the IMF. Furthermore, a € 10 bn envelope may become available immediately to the financial sector to help stabilise it. It is unclear whether this will be enough to remove the capital controls currently in place. Against emergency funding and in order to start negotiations on a new ESM programme, Greece will have to implement a number of measures by 15 July and 22 July, in a very significant back-tracking move on the part of the Greek Government (see here text of the Euro Summit, source: The New York Times)

The global financial envelope for Greece will be between € 82-86 bn, larger than what was requested, due to the severe deterioration of the economy. Up to 25bn of that package may be earmarked for the banking sector (including the 10bn emergency funding). The document does not open any avenues for debt reduction though it considers that further restructuring through extension of maturities and grace periods may be considered after an initial review of the programme. That discussion is likely to open up again once the emergency situation is dealt with.