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Key elements of the Greek debt deal with the euro zone and IMF

Euro zone finance ministers and the International Monetary Fund agreed on steps late on Monday to reduce Greece's public debt and help the country regain market access next decade.

Below are the main elements of the agreement.

- Greece will reach a primary surplus target of 4.55 percent of gross domestic product only in 2016, rather than 2014, to give the economy a better chance to start growing again.

- Greece will organize a debt buy-back of its bonds held by private investors. The buy-back will take place by Dec 12.

No amount or price was announced, except that the price offered is to be no higher than the closing prices for Greek debt on Nov 23. A source familiar with the ministers' discussions said the price under consideration was around 35 cents a euro.

- once the buy-back yields a positive outcome, the IMF will join the program and the euro zone will consider the following:

- a cut by 100 basis points in the interest rate on bilateral loans to Greece under the first bailout, reducing the rate to 50 basis points above financing costs or Euribor. Ireland and Portugal do not have to cut the interest because they themselves receive aid.

- the euro zone's temporary bailout fund, the EFSF, will cut its fees charged on loans to Greece by 10 basis points.

- maturities of loans to Greece, both bilateral and from the EFSF, will be extended by 15 years.

- Greece will not have to pay interest on loans received from the EFSF for 10 years.

- Profits from the European Central Bank's Greek bond portfolio, acquired during the bank's Securities Market Programme (SMP) will be handed over to Greece for debt servicing from the budget year 2013 onwards. No amount was given in the statement of the Eurogroup, but a euro zone source said this amounted to 11 billion euros.

- euro zone countries will consider further measures and assistance, including a further interest rate reduction on bilateral loans to Greece to help Athens reach debt sustainability when Greece reaches a primary surplus and meets all the conditions in the reform program.

- Greece's debt-to-GDP ratio is to fall to 175 percent in 2016, to 124 percent in 2020 and substantially below 110 percent in 2022.

- Euro zone countries will continue to finance Greece until it regains market access, if Greece sticks to the agreed reform program.

- Greece will get a tranche of aid of 34.4 billion euros in December, of which 10.6 billion will be for budget financing and 23.8 billion for the recapitalization of banks. A further 9.3 billion euros will be disbursed to Greece in three sub-tranches in the first quarter of 2013 if Athens meets reform milestones set by the lenders.

A formal decision on the disbursement of the money will be taken on Dec 13, if national procedures in euro zone countries are completed and following the review of the results of the debt buy-back operation.

[Source: By Jan Strupczewski, Reuters, Brussels, 27Nov12]

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