Bridge loan needed for August

Greece is hoping to receive a bridge loan this summer to cover bonds worth 3.2 billion euros that mature on August 20, along with their interest (worth another 600 million).

“We are trying to secure some bridge funding by September,” a high-level official at the Finance Ministry said, adding that the government has already submitted a request to the eurozone.

Nevertheless, a source from the troika of Greece’s international creditors -- the European Commission, European Central Bank and the International Monetary Fund -- noted that, at the moment, “it would have been unrealistic for the finance ministers of the eurozone to agree to such a thing.” The same source added that this could happen later, “after Greece has made specific steps,” such as a commitment to the promotion of privatizations.

The bridge loan idea provides for Greece asking the eurozone to deliver an extra loan to Athens between two planned disbursements of installments of the existing bailout.

For the Eurogroup to agree to a planned tranche, it will have to receive a positive report from the troika regarding the course of the adjustment program.

The troika, however does not have to give its consent for a bridge loan. The eurozone delivers such loans provided that their amount will be deducted from the next planned installment. That is exactly where the problem lies right now, because given that the troika report will not be ready before September, the next tranche is not certain at all.

Therefore, if the eurozone decides to give Greece 3.8 billion euros by August 20, it will have to take the risk of presuming that the troika report regarding the course of the Greek economy will be positive, and the data to date does not point in that direction. On the other hand, since the Greek bonds and interest maturing on August 20 are in the European Central Bank’s portfolio, if there is no intermediary funding to Greece it will appear as if the eurozone itself is unwilling to pay the ECB.

The balance is tight, while Athens understands that the International Monetary Fund at this stage has no intention of approving any loans to Greece without any tangible progress in the program.

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