The Greek finance minister is in a hurry with the repayment.
(Photo: dpa)
Athens Greece is negotiating with its debtors about the early repayment of aid loans. According to unofficial information from the Ministry of Finance in Athens, it concerns the repayment of loans that Greece received as part of the first aid program, the so-called Greek Loan Facility (GLF).
The package was put together in May 2010 at the beginning of the Greek sovereign debt crisis. It comprised bilateral loans from the euro countries and the International Monetary Fund (IMF) amounting to 110 billion euros. The repayment of these loans runs regularly until 2041.
With the early repayment of several loan installments, Greece wants to reduce its debt ratio. Observers suspect that the Athens finance minister Christos Staikouras intends to use the early repayment to provide backing for the debate that is now beginning about the reassessment of the EU Stability Pact.
Greece is one of those countries that are working towards more flexible deficit and debt targets. With a proactive debt reduction, Greece could give its arguments more credibility, it is said in Athens’ financial circles.
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Lowering the debt ratio is also seen as an important prerequisite for improving Greece’s creditworthiness. The rating agencies currently rate the country one to three notches below the coveted investment grade. The government hopes Greece will join the investment-worthy league in 2022.
Finance Minister Staikouras is in a hurry with the repayment
The negotiations on early repayment are complicated because all euro governments, the euro stability fund ESM and the IMF have to agree. Specifically, according to information from the Handelsblatt, it is about the repayment of two GLF loan installments with a total volume of 5.28 billion euros, which are due for repayment in 2022 and 2023.
An early redemption of the remaining IMF loans is also being considered for the coming year. This is around 1.71 billion euros that have to be repaid as planned by 2024. The funds for the repayment should come from the liquidity reserve. Greece currently has a reserve of around 40 billion euros. The cushion was created in 2018 when the rescue programs expired from unneeded aid loans and has been topped up with several new issues since then.
Finance Minister Staikouras is in a hurry with the repayment. He would like to at least repay the GLF installment due next year by the end of this year in order to reduce the debt burden.
According to calculations by the IMF, the corona recession and state aid with which Staikouras supported struggling companies during the pandemic and secured jobs at risk increased budget spending to 60.7 percent of gross domestic product (GDP) last year. Only France recorded an even higher rate of 61.8 percent. The average in the euro zone was 53.6 percent.
The rising spending increased the budget deficit and the mountain of debt. According to previous calculations, the debt ratio reached a new record of 205.6 percent of GDP at the end of 2020. In fact, the value should be even higher.
Because last week the state statistics office in Elstat revised its economic data. After that, the Greek economy did not shrink by 8.2 percent in 2020, as previously assumed, but by nine percent. This increases the debt ratio. Elstat plans to publish updated data on Friday.
Ambitious goal
For this year, Finance Minister Staikouras has so far set a debt ratio of 197.7 percent of GDP. In light of the new numbers for 2020, this is an ambitious goal. The IMF expects a rate of 206.7 percent for Greece this year.
With the early repayment of the GLF aid money, if possible before the end of the year, the finance minister wants to ensure that Greece does not break the 200 percent mark again – and thus provides an occasion for calls for stricter debt rules in the EU.
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