Following the successful outcome of the debt buyback operation completed by the Greek government earlier this week and the finalisation of the relevant national procedures, on 13 December the Eurogroup formally approved the disbursement of the next instalment of financial assistance to Greece (a total amount of EUR 49.1 billion).
"This has been a difficult process, but now, with the strong resolve of the Greek government and the close watch of the Troika, we are convinced that the programme is back on a sound track", said President of the Eurogroup, Jean-Claude Juncker.
The debt buyback operation was one of the measures agreed in November to support Greece's long-term debt sustainability. It resulted in the buyback of debt with a face value of nearly EUR 32 billion. This represents about half of Greece's total outstanding debt held by the private sector.
The Eurogroup confirmed that the result of the debt buyback operation will contribute to a substantial reduction of the Greek debt-to-GDP ratio. Greece's goal is to reduce its public debt to 124% of GDP in 2020.
Full implementation of the adjustment programme and of the remaining measures agreed by the Eurogroup in November should help achieve this goal, the Eurogroup noted. Greece and the other euro-area member states also confirmed they were prepared to take additional measures, if necessary, to ensure that this objective is met.
The Eurogroup is convinced that all the effort invested and the reforms already implemented by Greece "will allow the Greek economy to return to a sustainable path".
Further financial assistance will be disbursed by the European Financial Stability Facility and will come in several tranches: EUR 34.3 billion will be paid in the coming days and the remaining amount will be disbursed in sub-tranches during the first quarter of 2013.
The first part of the second tranche will cover the costs of bank recapitalisation and resolution and will be paid in January.
Remaining payments to cover budgetary financing will be linked to the implementation of specific "milestones" in implementing reform programme measures, to be agreed by the Troika (the European Commission, the European Central Bank and the International Monetary Fund).
Towards a possible assistance programme for Cyprus: discussions continue
The other item on the Eurogroup's agenda was an update on the ongoing discussion of a possible macro-financial assistance programme for Cyprus, following staff level agreement on a draft memorandum of understanding in November.
The aim of such a programme would be to ensure the sustainability of Cyprus' public finances and the stability of its banking sector.
The Eurogroup welcomed the commitment the Cyprus authorities' are demonstrating to undertaking the reforms envisaged in the draft memorandum. The ministers were confident that the final agreement on the programme could be reached soon, and were assured that Cyprus's immediate financing needs were covered.
A due diligence exercise assessing the capital needs of the financial sector in Cyprus will deliver its final results in mid-January, thus clarifying an important element for final agreement on a programme.
"We call on the international institutions and Cyprus to finalise negotiations accordingly", said President Juncker.