June 22, 2018 / 12:52 AM / 5 months ago

Factbox: Key elements of euro zone debt relief for Greece

LUXEMBOURG (Reuters) - Euro zone finance ministers reached an agreement on debt relief for Greece on Friday to smooth out the return of Athens to market financing after eight years of living mainly on loans from euro zone states.

Below are key elements of the debt relief agreement which will lead to a successful conclusion of the current Greek bailout program, the third since 2010:

- Greece will get the last disbursement of 15 billion euros under its 86-billion-euro bailout, of which around 25 billions will remain unused. Out of this amount, 5.5 billion will be disbursed to a segregated account, to be used for debt servicing and 9.5 billion will be disbursed to a dedicated account set up to build up cash buffers, to be used for debt service in case of needs.

- The cash buffer, which already includes funds provided by Greece, will reach a final capacity by the end of the program of 24.1 billion euros covering the sovereign financial needs for around 22 months following the end of the program on Aug 20.

- Greece will maintain a primary surplus of 3.5 percent of its gross domestic product (GDP) until 2022 and, thereafter stick to EU budget rules, which would mean a primary surplus of 2.2 percent of GDP on average in the period from 2023 to 2060, according to European Commission estimates.

- Maturities of 96.9 billion euros worth of loans will be extended by 10 years. This measure concerns loans given to Greece under its second bailout by the European Financial Stability Facility (EFSF) - the instrument used by euro zone countries to finance the first bailouts at the beginning of the financial crisis, later replaced by the European Stability Mechanism, the bloc’s current bailout fund. Under the deal, interest and amortization payments on the EFSF loans will be deferred by 10 years as well.

- The euro zone abolishes the step-up interest rate margin related to the debt buy-back tranche of the second Greek program as of 2018.

- The euro zone will transfer to Greece the profits made on Greek bonds by the European Central Bank and euro zone central banks in equal amounts on a semi-annual basis in December and June, starting in 2018 until June 2022. The money will be used to reduce gross financing needs or to finance other agreed investments, and will be conditional on Greece sticking to the agreed implementation of reforms.

- The deal ensures that Greece’s gross financing needs remain below 15 percent of GDP in the medium term and below 20 percent of GDP thereafter, with debt on a downward path.

- Euro zone finance ministers will review in 2032 if additional debt measures are needed to ensure that Greek gross financing needs stay below the set thresholds, and take appropriate actions, if needed.

- In case of an unexpectedly adverse economic scenario in Greece the Eurogroup can further re-profile, cap and defer interest payments of the EFSF to the extent needed to meet the agreed gross financing benchmarks.

- Greek economic developments will be monitored by the Commission, the European Central Bank, the International Monetary Fund and the bailout fund on a quarterly basis.

Reporting By Jan Strupczewski and Francesco Guarascio

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