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.