Group Economics
Daily Insight
Macro & Financial Markets Research
Greece deal soon?
Nick Kounis & Aline Schuiling
+31 20 343 5616
5 August 2015
Greek finance minister strikes upbeat tone, saying talks will be concluded this week Government looking to pass agreement through parliament by 18 August given ECB payment Bank recapitalisation and lifting of capital controls targeted by year end
Optimism on talks in Athens
Payments due by Greece during the rest of the year
The Greek government struck a positive note on its talks with
EUR bn
the quartet of creditors, which aim to reach agreement on an ESM programme. Finance Minister Euclid Tsakalotos told reporters after a meeting with representatives of the IMF, EC, ECB and ESM that ‘everything will be concluded this week’. A government spokesperson added that the drafting of the agreement would start on Wednesday. European officials were not quite as bullish, but also sounded positive. Commission spokeswoman Mina Andreeva told Reuters that ‘we are moving in the right direction’. Timeline for Greece deal Earlier on Tuesday, a Greek government official outlined the timeline for the process of approving the EUR 86bn ESM deal.
8 7 6 5 4 3 2 1 0 Aug-15
Sep-15 ECB
Oct-15 IMF
Nov-15
Dec-15
EFSM
Source: ABN AMRO Group Economics
The government aims to pass the agreement through parliament by 18-19 August following submission on the 14th.
Box: Greece’s upcoming payments coming due
This ambitious timetable is necessary to allow the first ESM disbursement in time for Greece to pay the maturing Greek
Greece has various payments coming up and without new
government bonds held by the ECB on 20 August (see below).
funds would not be able to meet them. The EUR 7.16bn bridge
Meanwhile, the official said that other eurozone governments
loan that Greece received from the European Financial
would pass the agreement through their national parliaments
Stability Mechanism (EFSM) a few weeks ago had to be spent
on 12-14 August conditional on approval by the Greek
immediately. Greece had to pay its arrears to the IMF and
legislature. If Greece does not manage these deadline,
some new obligations to the IMF as well. On top of that,
another bridge loan would be necessary.
repayment of bonds held by the ECB and repayment of a loan from the Bank of Greece were due in July as well. Looking
Greek bank re-capitalization by year end
forward, another EUR 3.2bn needs to be repaid to the ECB on
The process to put the Greek banks back on a firmer footing is
20 August. Subsequently, the regular flow of payments to the
underway, but will not be completed until later in the year. A
IMF continues in September, while the 7.16bn EFSM bridge
Greek central bank official outlined that the AQR and stress
loan expires in October. All in all, Greece needs to repay some
tests – needed to determine capital needs – would be
EUR 13.5 bn during the rest of the year.
completed by the end of October. Recapitalisation of the banks was targeted by mid-December, which would allow the lifting of capital controls by the end of the year. The recapitalisation of
Big obstacles ahead
the banks would not involve a depositor bail in according to the
The apparent progress in talks is very welcome. However,
official. In the meantime, there has been a EUR 1bn net
major risks remain going forward. Greece will need to
deposit inflow since 20 July, and the banks would likely not
implement tough measures in the face of a very deep
need any further hike in the ELA ceiling.
recession. In addition, the country needs major debt relief, but Germany and other states are reluctant to go too far down this road. Finally, the programme is not fully financed. We will elaborate on these issues in our coming daily notes.