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Public debt: Early loan repayment from the first memorandum in early December

The relevant approval from the EuroWorking Group is expected in September

The government is expected to proceed with the early repayment of the loan tranches of the first memorandum amounting to 8 billion euros at the end of the year, probably in December.

These correspond to the years 2026-2028, amounting to 2.64 billion euros for each year. The relevant approval from the EuroWorking Group is expected in September, with competent sources placing the completion time of the early repayment before the end of 2024.

15.7 billion euros

It is noted that the amount of 15.7 billion euros is reserved in a special account at the Bank of Greece and largely comes from a loan from the European Stability Mechanism (ESM), amounting to 9 billion euros as well as bond issues. The remaining 3 billion euros for the early repayment will be covered by the country’s cash reserves.

It is recalled that discussions with the ESM have been ongoing for months in order to give permission for free access to 15.7 billion euros, and apparently the result is positive. The formal condition was the country’s exit from enhanced supervision, which has been met since August 2022, but in essence it was the recovery of investment grade which has also been achieved.

On its part, PDMA has every reason to lower the “cushion” since the cost of maintaining it at the current level is estimated to amount to approximately 600 million euros per year, based on the average interest rate of the Greek debt of 1.5%. Therefore, if it is reduced to 10 billion euros, its annual cost will be limited to below 200 million euros per year.

In addition to savings, the reduction of the “cushion” is important because it marks the end of an era. The 15.7 billion euro “cushion” was created to provide markets with assurance that Greece would be able to service public debt at a time when, due to mishandling, its credibility had sunk.

Now Greece has not only regained investment status, but normality has also been restored in its financing from the markets.

It is worth noting that in December 2023, another early repayment of loans was made, totaling 5.29 billion euros, expiring in 2024 and 2025. These are loans granted to Greece as part of the first support program, which was agreed in May 2010 and included bilateral loans from Eurozone countries amounting to 52.9 billion euros with a repayment period from 2020 to 2040.