Greek Prime Minister Alexis Tsipras said yesterday that a decision by the Eurozone’s creditors to offer debt relief marked a definitive turn of the crisis-hit country away from a relentless cycle of austerity.
Eurozone finance ministers had reached an agreement to smooth out the return of Athens to market financing after eight years of living mainly on loans from Eurozone states.
The debt relief is aimed at a successful conclusion of the third Greek bailout program me since 2010.
Under the terms of the agreement, Greece will get the last disbursement of €15bn under its €86bn bailout, of which around €25bn will remain unused.
Of this, €5.5bn will be disbursed to a segregated account, to be used for debt servicing and €9.5bn will go 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 programme of €24.1bn – enough to cover financial needs for around 22 months following the end of the programme on August 20.
Greece will maintain a primary surplus of 3.5pc of its gross domestic product until 2022 and thereafter stick to EU budget rules, which would mean a primary surplus of 2.2pc on average in the period from 2023 to 2060, according to European Commission estimates.
Maturities of €96.9bn worth of loans from the second Greek bailout will be extended by 10 years with interest and amortisation payments deferred by 10 years as well.
They are owed to the European Financial Stability Facility (EFSF).
The Eurozone abolishes the step-up interest rate margin related to the debt buy-back tranche of the second Greek programme as of 2018.
The deal ensures that Greece’s gross financing needs remain below 15pc of GDP in the medium term and below 20pc of GDP thereafter, with debt on a downward path.
Eurozone finance ministers will review in 2032 whether additional debt measures are needed.
In case of a new economic shock the Eurogroup can revisit the details of the debt deal.
Greek economic developments will be monitored by the troika of European Commission, European Central Bank, the International Monetary Fund and the bailout fund on a quarterly basis.