Euro zone finance ministers and the IMF at their yesterday meeting, in their third round of official talks, agreed on a package of measures to reduce Greek debt by EUR 40bn, cutting it to 124% GDP by 2020. Importantly, Greece was finally cleared to receive a EUR 34.4bn loan installment in December.
Bottom line: To reduce Greece's debt ministers agreed to cut the interest rate on official loans to Greece, extend their maturity by 15 years to 30 years, and grant the country a 10-year interest repayment deferral, while dismissing calls for debt relief. Eurogroup also committed themselves to take further steps to lower Greece's debt to "significantly below 110%" in 2022, suggesting that some write-off of loans may be necessary from 2016, when Greece is expected to reach a primary budget surplus. Eurogroup Chairman Jean-Claude Juncker said ministers would formally approve the release of aid tranche on December 13. The “Greek deal” and unlocking the next tranche of support for the country should support the market’s optimism that European policymakers are taking steps to contain the debt crisis. European equity futures advanced today, while Asian stocks rose after the deal was announced. The euro touched this month’s high of 1.3009 against the dollar in late trading hours and is currently trading at 1.2990 as of 8.35am CET.