Step by step, European authorities may believe that they’re getting on with the job, but capital markets clearly dislike the speed; actually, the lack of any speed at all. The euro-group has requested further adjustment measures for 2013-2014 from Greece and wants an acceleration of privatisation plans, too. Unfortunately, it has been decided to delay the release of the €8bn sixth tranche of the first rescue of Greece beyond the initially marked date of October 13, since the report of the so-called Troika or European Central Bank-European Commission-International Monetary Fund will not be ready.
In Madrid, Ahorro Corporación Financiera (ACF) doesn’t make the case for optimism, yet it focuses on one sign of progress.
“In any case, officials have assured that the euro-group will make a decision in October. Technical reviews are being discussed with regards to the participation of the private sector in the second rescue, although it is not clear whether a haircut of more that 21% will be applied as it has been agreed, so far.
“The only agreement reached in firm has been over the collateral required by Finland in exchange for its contribution to the second bailout.”
What seems obvious is that Finland’s example is a dangerous precedent.
“The guarantees will be available to any country that requests them, but this will have a cost: countries seeking collateral will have to accelerate the repayment of capital paid to the permanent rescue fund (something the other countries will do in phases) and the profits that the loans to Greece generate will be capped, so it is unlikely that any country apart from Finland requests this collateral.”
Specifically, countries that intend to require these additional safeguards will have to inject its due capital into the EFSM in the first year of operation, and not in 5 years as planned.
“Furthermore, that additional collateral clause (demanded only by Finland, so far) would only be disbursed once the EFSM funds mature in 30 years.”
Now, where were we?