Greece may receive as much as 85 billion euros ($124 billion) in a second bailout package aimed at preventing default and boosting the euro, according an official at the Austrian Finance Ministry.
Seventy percent of the new aid package will come from European nations and private investors, with the rest coming from the International Monetary Fund. The EU still owes Greece the final 12 billion euros of its original aid package, and will meet tomorrow to approve the payment. The final tranche of aid was conditioned upon Greece’s parliament making massive cuts to their budget in an austerity package that was passed Wednesday and instituted Thursday. However, Greece’s austerity package cuts 78 billion euros from their budget, a figure shy of what EU officials had hoped.
Still, news of budget cuts and impending aid have pushed down bond yields, which move counter to prices, with the two-year note dropping 89 basis points to 26.41% this morning. Two-year note yields topped 30% last month.
Now German and French banks, some of the biggest holders of Greek debt, are considering joining the new rescue package by rolling over part of their Greek bonds. German banks have already agreed to swap Greek bonds maturing through 2014 into longer-maturity debt. French officials have hinted at a rollover of 70% of debt maturing through mid-2014 into new 30-year bonds, or a 90% rollover into new 5-year bonds. German and French officials have hinted at a 30 billion euro target for the rollover.
The new bailout program should run from mid-2011 through the next three years. No payment dates have yet been set, but EU, IMF, and European Central Bank officials will continue to conduct quarterly reviews of Greece’s progress as they did with the first bailout package, in order to make sure the program is on track and Greece continues to do their part.
The first payment of the new program will likely come in September.
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