Αthens moved a step closer to another major reduction of its bailout-era debt burden on Friday after the European Stability Mechanism (ESM) approved the Greek government’s plan to repay 6.94 billion euros of loans from the country’s first international rescue package, years ahead of schedule.
The decision clears the way for Greece to proceed this month with the early repayment of bilateral loans granted under the Greek Loan Facility (GLF), part of the first bailout agreed with eurozone partners in 2010 at the height of the sovereign debt crisis. The ESM and the European Financial Stability Facility (EFSF) also waived provisions that would normally require Greece to make proportional early repayments to those institutions as well.
The repayment covers debt originally due to mature in 2029 and between 2033 and 2035. It will be financed in part through the remaining resources of a special cash buffer established when Greece exited its adjustment program in 2018, with the reserve expected to be fully exhausted following the transaction.
ESM Managing Director Pierre Gramegna said the move sends a positive signal to financial markets, reduces Greece’s exposure to interest-rate risks and further improves the structure of its public debt.
The latest repayment marks another step in Athens’ strategy of accelerating the retirement of bailout-era obligations as the country’s fiscal position and borrowing profile improve. Greece completed the repayment of its International Monetary Fund (IMF) loans two years ahead of schedule in 2022 and has carried out successive early repayments of GLF debt in recent years.
Over the past year, government officials have increasingly highlighted debt reduction as a key component of Greece’s economic recovery narrative. Reporting has noted that continued primary budget surpluses, stronger-than-expected growth and a return to investment-grade status have enabled Athens to pursue additional prepayments while seeking further upgrades from international rating agencies.
The GLF originally consisted of 52.9 billion euros in bilateral loans provided by 14 eurozone countries. Following the latest transaction, the outstanding stock of those loans will be reduced further, extending a trend that has seen Greece steadily unwind liabilities accumulated during the debt crisis that reshaped the country’s economy over the past decade and a half.
Source: tovima.com
