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European CommissionThe Second Economic Adjustment Programme for Greece. Fourth Review134. The disbursement related to the fourth review would amount to EUR 8.3 billion. Given the delayin completing the review, Greece missed two disbursements compared to the schedule of the July 2013compliance report: one of EUR 2.6 billion originally due to take place in Q4 2013 and a second one ofEUR 5.7 billion initially scheduled for Q1 2014. The current disbursement would therefore regroup thetwo and would be divided in three tranches, subject to the fulfilment of a number of conditions (seebelow). The first tranche of EUR 6.3 billion would be released to Greece mid-April following thecompletion by the country of a number of prior actions. The second tranche of EUR 1 billion would bereleased in June after the completion of milestones by end-May. The third and final tranche of EUR 1billion is expected to be disbursed in July after Greece completes milestones by end-June. Themilestones are indicated in Table 12. All tranches will be disbursed directly to the segregated account.The disbursement of the first tranche of EUR 6.3 billion will ensure that the debt redemptionobligations of May will be covered. In parallel to the EFSF disbursement, the IMF is expected to releasefunds to Greece of around EUR 3.5 billion following the approval of the review by its board.135. On top of EFSF-IMF disbursements associated to the 4 th review, Greece would have needed someadditional EUR 5 billion to cover its financing needs until end-August. However, the needs havebeen lowered by EUR 3 billion with the government 5-year bond issuance in April (see section 2.2) andcould be reduced further if the State's preference shares in Greek banks are cancelled - as banks findprivate investors, or part of the ETEAN bonds are cancelled.‣ Cancellation of state preference shares by Greek banks. In 2009 Greece issued the so-calledpillar I bonds worth EUR 5.2 billion to capitalize Greek banks in kind. In exchange for these bonds,the Greek State was given preference shares in the banks that required the recapitalisation. In thecourse of the on-going recapitalization, some banks have indicated their intention to raise higheramounts from the markets in order to buy back the state preference shares. This would reduce thegovernment financing needs for May, when the pillar I bonds are due to mature.‣ Cancellation of part of the ETEAN bonds. ETEAN is an extra-budgetary fund whose mainobjective is to give guarantees to SMEs so that the latter can have access to financing. In 2009bonds worth EUR 1.2 billion were issued as capital for ETEAN and are set to mature in August.When guarantees given to SMEs were called, ETEAN gave banks the equivalent in bonds. Theauthorities estimate that of the total bonds still held by ETEAN, part will not be needed and can becancelled when they mature, thereby reducing financing needs for August.136. To cover remaining needs, if any, additional funds could come from a number of measuresincluding repo operations and the use of idle resources available in parts of general government.‣ Intra-general government borrowing through repo operations. While the State cash reservesrun relatively low, other general government entities dispose of sizable cash reserves. As part of theprogramme, mechanism will be put in place to enable the State to use idle resources available inother parts of general government to cover part of its financing needs. As a first step, the authoritiesare setting up a repo framework using state government assets as collateral to draw on excessliquidity in general government subsectors for up to EUR 3 billion. This framework will beimplemented as part of a prior action and although the repos will be short-term, they can be rolledover as needed.‣ Use of idle resources available in other parts of general government for liquidity purposes.The authorities have agreed to develop a plan for cash management reform to be implemented as of1 January 2015 aimed at reducing the currently high segmentation of the management of thevarious general government accounts. A first step in this reform will be to analyse the accountsheld by State/central government entities in commercial banks and to close down all theunnecessary accounts, bringing the money back into the Treasury Single Account (TSA). Theclosure of the unnecessary accounts would take place by end-June and would bring added liquidityback to the TSA.137. Implementation of these above measures, as well as disbursements according to the programmeschedule would help to cover the financing gap until May 2015, estimated at EUR 5.5 billion(which takes into account the government bond issuance in April 2014, but not the likely redemption ofa part of the pillar I bonds, nor the use of idle resources in parts of the general government). TheEurogroup commitment to provide adequate support to Greece during the life of the programme andbeyond until it has regained market access provides necessary reassurances that the programme remainssufficiently financed.70
4. Debt sustainability analysis and program financingTable 10. Financing programme: quarterly financing needs and disbursements of official assistancein bn EUR, unless otherwise notedFinancing needs2012 2013 2014Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4A. Government cash deficit 2.5 4.8 0.3 2.6 1.5 3.6 -0.8 3.2 0.5 3.0 -1.2 1.0Primary deficit ("-" is surplus) 1/ 0.4 3.2 -1.8 1.3 -0.2 1.9 -2.5 2.5 -1.4 1.7 -3.0 0.2Interest payments 2.1 1.6 2.1 1.3 1.8 1.7 1.8 0.7 2.0 1.3 1.8 0.8B. Other government cash needs 1.3 -1.2 -0.1 2.9 1.1 2.7 1.2 1.5 0.0 1.1 0.7 0.7Estimated cash adjustments 2/ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Arrears 0.0 0.0 0.0 0.5 1.1 2.2 1.2 1.0 0.0 0.7 0.7 0.7Cash buffer 1.3 -1.2 -0.1 1.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0ESM capital 0.0 0.0 0.0 0.9 0.0 0.5 0.0 0.5 0.0 0.5 0.0 0.0C. Maturing debt 5.0 4.1 0.0 0.3 4.2 7.2 3.7 1.1 3.4 11.9 7.6 2.4Bonds & loans after exchange 5.0 4.1 3.5 0.3 0.8 7.2 3.0 0.1 2.0 10.1 5.7 0.1Bonds after PSI and DBB 3/ 4.7 3.8 3.1 0.0 0.7 6.5 2.8 0.0 1.9 9.3 5.4 0.0other, incl. loans 0.4 0.3 0.3 0.3 0.1 0.6 0.2 0.1 0.2 0.7 0.2 0.1EU repayment 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0IMF repayment 0.0 0.0 0.0 0.0 0.0 0.0 0.7 1.0 1.3 1.9 1.9 2.3Short-term debt 0.0 0.0 -3.4 0.0 3.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0D. Cost of PSI 34.6 25.0 0.0 27.3 0.0 7.2 0.0 0.0 0.0 0.0 0.0 0.0Cash upfront for PSI (sweetener and accrued interest) 34.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Bank recapitalisation 0.0 25.0 0.0 16.0 0.0 7.2 0.0 0.0 0.0 0.0 0.0 0.0Cash upfront for Buyback 0.0 0.0 0.0 11.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0E. Gross financing needs (A.+B.+C.+D.) 43.4 32.7 0.2 33.1 6.9 20.6 4.1 5.8 3.9 16.0 7.0 4.0Financing sourcesF. Private financing sources 0.0 0.0 0.0 0.0 0.1 0.0 0.2 0.7 1.9 4.8 0.4 -1.9Market financing 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.0 0.0 0.0Privatisation 0.0 0.0 0.0 0.0 0.1 0.0 0.2 0.7 0.0 0.7 0.4 0.4Use of subsector deposits through repo operations 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.9 1.1 0.0 -2.3G.Additional financing sourcesANFA & SMP profits 0.0 0.0 0.2 0.1 0.3 0.2 1.6 0.5 0.3 0.0 2.1 0.0Contingency measuresH. Financing needs per quarter 43.4 32.7 0.0 32.9 6.5 20.3 2.3 4.5 1.7 11.2 4.5 5.9I. Official assistance disbursements 38.8 36.8 0.0 34.3 8.1 19.3 4.3 0.5 0.0 10.8 6.4 3.5- EU 4/ 37.1 36.8 0.0 34.3 4.8 17.5 2.5 0.5 0.0 7.3 2.9 0.0- IMF 1.6 0.0 0.0 0.0 3.3 1.8 1.8 0.0 0.0 3.5 3.5 3.51/The State primary balance is used to calculate financing needs due to the limitations of the inter-government borrowing framework.2/ Includes guarantees on SOE debt, transfers from/to SSFs and other consolidation items.3/ No haircut on ECB holdings. Maturity profile of ECB holdings proportional to outstanding bonds.4/ Of the total committed amount for the EU program of EUR 144.7 bn, EUR 1 bn represents savings from the PSI facility which can not be used for normal programme financing as the availability of the sum expired and was legallycancelled.Source: Commission services71
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OUTLINE OF THE REPORTEXECUTIVE SUMM
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LIST OF GRAPHSGraph 1. Economic cli
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ACKNOWLEDGEMENTSThe report was prep
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1. INTRODUCTION1. INTRODUCTION1. Th
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OCCASIONAL PAPERSOccasional Papers
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