The programming envisages the steady reduction of debt at an average annual rate of 10% of GDP until the end of 2028, while also reducing its net balance by approximately 10 billion euros.
This reduction will come from consistently positive growth rates exceeding 3.5% annually in nominal terms (i.e. real GDP, if annual inflation is added), consistently high primary surpluses of around 2.5% of GDP. At the same time, we will have a gradual reduction of the balance of the debt, which will officially start from this year, since the net borrowing needs of the State for the next three years will be similar to this year’s, i.e. they will only exceed 5 billion euros, due to the high primary surplus that will exceed the 2.1% of GDP which is the annual target.
Two stations
In the meantime, the debt will have two important milestones until next April. The first will be the payment at the end of the year of the triple installment of 7.9 billion euros from the bilateral loan with the countries of the eurozone.
In this phase, together with the final approvals for the loan installments, the second fight against Eurostat will be helpful, which – it seems – has given in to its demand that the 17.5 billion euros of state guarantees from the “Hercules” plan in debt. Now, however, it is asking to add 12 billion euros to the debt, out of a total of 24 billion euros of deferred interest on the 90 billion euro loan that Greece got from the European Financial Stability Fund (EFSF) in the second Memorandum. This while the gradual repayment of these interests is in a grace period until 2032.
“Ground Zero”
The “zero point” for the more intensive management effort with the aim of reducing the debt faster is expected to come around the middle of December.
By then all the formal approvals for the early repayment of the 3rd tranche and the release of the €15.7 billion “cushion” from the European Stability Mechanism (ESM) will come.
In September, the effort to drastically reduce the debt begins with the early repayment, for the first time, of a triple installment amounting to 8 billion euros from the loan that Greece took from the eurozone at the beginning of the first Memorandum, directly from the eurozone countries .
From the beginning of autumn, Athens will start officially sending to the institutions the request for the early repayment of the triple installment from the GLF. The request will first have to be approved by the Eurogroup working group (Euro Working Group) and ratified at one of the meetings of the council of finance ministers of the eurozone.
Another long process will be the approval of the Greek request by the national parliaments of Germany, Finland, the Netherlands, Austria and Slovakia. As soon as the process of the national Parliaments is over, it will be the turn of the European Stability Mechanism (ESM). In addition to the -formal- approval of the Greek request, its right to claim, as Greece’s largest creditor, the repayment of its own loans at the moment Greece will prematurely repay three installments of the GLF should also be waived.
Eurostat
A little earlier in October we will have the first serious discussion with Eurostat about the interest on the 90 billion euro loan from the European Financial Stability Fund (EFSF). The 24 billion euros of interest, which will have accumulated since 2012 when Greece took the loan, will start to be repaid formally from 2032 but effectively from 2038. However, Eurostat claims that half of the interest (12 billion euros) on the debt. On a fiscal basis this would not be a problem, since they are set to be repaid from 2032 onwards anyway. However, it will create a problem for the debt picture to investors, since debt as a percentage of GDP will suddenly increase by around 5%.
The Greek side comes up with a basic argument that when in 2012 Greece had asked to record the interest of this loan, Eurostat itself had said that it was not necessary and now suddenly requests their retroactive recording.
The goal is to upgrade again of investment grade
The drastic reduction in debt for 2025 is expected to bring the next upgrade of the rating from the minimum investment grade of BBB- which is currently in the grade of BBB. Then the Ministry of National Economy and Finance expects a new upgrade until 2028 that will raise the country’s credit rating to BBB+, bringing the country to the brink of A. This will in turn lead to lower borrowing costs Public through the gathering of more conservative investors, who will increase their position in Greek bonds, which they will hold as savings products.
At the same time, in combination with the reduction in interest rates by the ECB, we will have a cumulative reduction in interest rates of around 5%, especially for Greece. The 3% is expected to come from the reduction in borrowing costs which will also drag down bank lending, while 2% will be the reduction of the euro interest rates by the ECB from 4%, which is today, to 2%.
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