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Anne Karina Asbjorn at Nomura looks at the......>

ESM: Anne Karina Asbjorn at Nomura looks at the potential offset to ESM supply
to Spain's paying down its now rather expensive ESM loans, which is Greek debt
relief measures.
- Asbjorn writes "One of the discussed debt relief measures for Greece is using
part of the remaining unused ESM funds to buy back IMF loans. If this option is
used we would expect an approximate E10bn adjustment in ESM issuance to fund the
E9.7bn IMF loans expiring during 2019-24."
- At present, IMF loans are the most expensive to Greece but ESM funding would
be cheaper than GGB issuance to reduce debt service costs. "after 20 August,
when the bailout programme expires, Greece will lose access to the remaining
cheap funding" according to Nomura.
- In terms of how this could influence markets "We would expect a weakening of
the ESM if this scenario of debt relief materialises, which may support our
short 10yr EFSF vs EIB."
- The issue of Greek debt relief will be discussed at or soon after the
Eurogroup meeting on 21 June.

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