European capital markets have not been exactly convinced that the agreements reached in Athens, in the early hours of 9 February with the country's official and private lenders will effectively guide Greece onto a sustainable long-term path, both as far as growth and making sovereign debt manageable are concerned. On top of that the Eurogroup set three conditions for Greece to gain access to new soft loans.

Theoretically, as of 13 February, Greece must begin the application of an agreement with the private holders of its debt bonds, including a 50% reduction in the nominal value of those bonds, a step that is expected to reduce its overall sovereign debt to 120% of GNP by the year 2020, namely the much-discussed Private Sector Involvement (PSI) voluntary agreement.

In tandem, Greece has to apply another agreement, this one fiscal, with its official creditors, namely the troika of European Union, the European Central Bank and the International Monetary Fund. The target of this agreement is to reduce the country’s fiscal deficit and produce a primary surplus (without counting interest-rate payments) of 4.1% of GNP by 2015. In this way, official creditors believe that their loans will be repaid.

Capital markets, however, do not have such extended time horizons – they are worried about everyday matters, such as the extent of voluntary participation in PSI, the final effort to reduce the Greek debt and the role of the ECB in the Greek ‘tragedy’.

Even if Greece uses the Collective Action Clause and forces all its private lenders to participate in PSI, analysts say that there will remain a residue sum of €15bn that separates Athens from the ideal 1.2/1 ratio between debt and income, which is deemed a major impediment in reaching a final agreement on the Greek debt.

This 'orphan' sum can only be absorbed by the ECB, because the official creditors to Athens, namely the Eurozone governments and the IMF, have stated that they have done enough. Many people involved, including representatives of the IMF and the European Commission, say that the ECB must enter the fray. However, in reality, this can be achieved without the central bank spending even one euro. All it has to do is to place on its books the Greek bonds that it purchased in the secondary market at 15-30% discount, at the price it paid to purchase them.

Last week the governor of ECB Mario Draghi, was rather positive for that. When asked about the central bank's potential participation in writing down the Greek debt said that the bank is willing to help Athens, but is not going to write any losses in doing this. This was an indirect confirmation that the ECB is going to participate in reducing the Greek sovereign debt by selling the €50bn it holds in Greek bonds to the EFSF/ESM, Eurozone's rescue  mechanisms. Obviously  those bonds will be sold to the EFSF/ESM at the purchase prise that the ECB paid to the secondary market to acquire those bonds. Later on EFSF/ESM can sell the bonds to Greece at the same reduced price, thus allowing Athens to cut down the nominal value of its sovereign debt by an estimated sum of €11bn, that is as much as the reduction at which the ECB initially bought the bonds in the secondary market. In this way Greece will further reduce its debts and facilitate its efforts to attain a manageable indebtedness level, after the realisation of the Private Sector Involvement in alleviating the country debt held by private sector investors by 50% is concluded.

In any case all that steps are not without dangers and that is why markets appeared quite 'sceptical' all along this past week.