Fra BNP Paribas:
Greece: Press speculates on extension of programme to end-2015 According to preliminary comments, the Eurogroup meeting ended without a deal on Greece, as expected. But, a news report from Die Zeit increased expectations of a resolution to the current impasse in the short term. The press speculation is yet to be confirmed, but according to the report, the current Greek programme would be extended until end-2015.
It would entail about EUR 11bn of unused funds in Hellenic Financial Stability Fund (funds initially earmarked for bank-recapitalisation purposes) to help Greece pay its IMF loan and ECB bond redemptions. Furthermore, Greece would be allowed to issue an extra EUR 2bn in T-bills and the IMF would not be part of the programme in terms of funding. If confirmed, an extension of the programme is good news in the short term. Although it would still prolong the uncertainty surrounding Greece, it would give the two sides more time to negotiate.
Greece, however, is likely to be asked to commit to implementing certain reforms in exchange for this support. The country’s European creditors have been highlighting their openness to providing a helping hand to Greece, including some form of a debt relief (potentially in the form of lower interest rates on loans and longer maturities). But they want Greece to deliver first. The ball, therefore, remains in Greece’s court to commit to its rescue programme and come up with an acceptable new set of reform proposal
