he package itself has largely been welcomed, with stock markets in the UK, France and Japan rising and German Chancellor Angela Merkel is reported on the BBC website as saying: “"It is our historical duty to support the euro; the euro is good for us; the euro is part of Germany’s economic success, and a Europe without the euro is unthinkable."
The package itself is €109bn (£96bn) of new loans along with various bolt-ons that should allay future fears of Greece actually defaulting through any lack of ability to pay off its debts. These include:
- extended repayment terms by up to 30 years;
- a reduction in what it pays on existing loans, down from the current 15% to 20%;
- the private sector voluntarily able to participate.
At the same time, Ireland and Portugal benefit from the EU/IMF doubling the amount of time it has to repay its existing loans.
The Institute of International Finance says these terms will lead to a loss to those lending to Greece of 20% of the market value of their debts.
On a positive note, Stéphane Monier, global head of fixed income and currencies, Lombard Odier Investment Managers, said: “The lower interest rate and lengthened maturities for the assistance loans will considerably reduce their debt-servicing obligations. Additionally, Greece will benefit from the rollover of maturing debt by banks and insurance companies.”
For those countries outside Greece, Monier still has words of warning, saying: “Despite politicians expressing their strong commitment to keep the euro together through this new package, we continue to worry about the peripheral countries capacity to deliver on their adjustment program."
