Greece is hoping that eurozone finance ministers will on Tuesday end weeks of uncertainty and clear the way for Athens to receive the 8 billion euros of loans that it needs to prevent running out of money before the end of the year.
The money was due to be disbursed in September but a number of holdups meant that Greece was kept waiting. New Democracy leader Antonis Samaras?s letter to Greece?s international creditors last week, in which he confirmed his support for the terms of the bailout program, appears to have cleared the last obstacle in the way of the loan installment being transferred to Athens.
European Economic and Monetary Affairs Commissioner Olli Rehn and German Finance Minister Wolfgang Schaeuble indicated the Eurogroup would sign off on the sixth tranche as long as there was a green light from the troika – the European Commission, the European Central Bank and the International Monetary Fund.
Should the loan installment be secured, attention will turn to negotiations with holders of Greek bonds over a 50 percent haircut, as agreed on October 26. Talks between Greek officials and the Institute of International Finance (IIF) are due to resume in Brussels today. The IIF has set up a steering committee to negotiate with Greece and the troika as well as a group of private creditors and investors, which include ?the bulk of the private sector holders of Greek government debt,? according to an announcement.
During recent negotiations, differences between the two sides emerged. One of the main points of disagreements is how Greece will be using the 30 billion euros that it will be lent by the eurozone and the IMF to entice banks to take part in the haircut. Athens is proposing that after the writedown, the lenders should be given cash for 15 of the remaining 50 percent and new bonds with an interest rate of 4.5 to 5 percent for the other 35 percent.
The IIF is arguing for the issuing of new bonds to cover the whole 50 percent but wants the notes to come with an interest rate of about 8 percent. Also, rather than a cash incentive, the banks want the bonds to be backed by collateral.
The Greek proposal would lead to banks sustaining net present value (NPV) losses of about 70 percent, while the IIF suggestion would mean that the investors lose no more than 54 percent.