|Live source: Thomson Reuters|
The EFSF, or European Financial Stability Facility, is a temporary bailout fund which is 29.07% guaranteed by Germany, 21.83% by France, 19.18% by Italy and 12.75% by Spain (Netherlands, Austria and Belgium back <13% combined). This is the amended allocation. The ESM, or European Stability Mechanism, is the permanent bailout fund that is expected to arrive in July. See the EFSF document for more info.
If all goes well with the Greek debt exchange with the PSI ("private sector involvement"), EFSF funds will be released to bailout Greece with austerity measures attached, which will avoid a hard default on March 20 when a 14 billion euro debt payment is due. Here is more information: Feb 21, 2012: Eurogroup Statement on €130B Greek Bailout, PSI Exchange (EUR/USD Charts). I also found a nice write up by Heidi Moore at MarketPlace on the details of the debt exchange. And what about the holders of Greek CDS? Very interesting.
So, yesterday S&P lowered its outlook on EFSF to negative, after lowering France and Austria to negative on January 17. Here is the summary from Reuters.
-- We have concluded that credit enhancements sufficient to offset what we view as the reduced creditworthiness of European Financial Stability Facility (EFSF) guarantors are not likely to be forthcoming.
-- We are therefore revising the outlook on the long-term rating on the EFSF to negative from developing and affirming the 'AA+/A-1+' ratings.
-- The negative outlook on the long-term rating mirrors the negative outlooks of France and Austria."
The EFSF-German bund yield spread was already pricing in heightened credit risk by widening. As was the French-German yield spread. Everything is known, or priced in, unless the debt exchange fails and Greece sees a hard default. The next LTRO will help backstop a liquidity crisis, but going forward, which country in the eurozone will tap bailout funds next, Portugal?.
Links on Greece, the EFSF, ESM and LTRO:
Euro Leaders Delay Decision on Bigger Bailout Fund (AP at ABC)
French parliament ratifies new eurozone rescue fund (AAP, ninemsn)
German EFSF Panel's Powers Limited to Bond Sales by Court (SF Gate/Bloomberg News)
ISDA To Hold First Greek Default Determination Hearing On March 1 (Zero Hedge)
Fitch on who’ll tap the LTRO - (FT Alphaville)
Focus Turns Now to Greek CDS Payouts (WSJ)
So Greece “Defaults” And Europe Moves On… (TF Market Advisors)
That Greek debt sustainability analysis in full (FT Alphaville)