Greece to Prepay $15 Billion, Eyes Debt Below Italy’s

Greece is preparing to repay about 13 billion euros, or roughly $15.1 billion, of debt ahead of schedule in 2026, according to a person familiar with the matter cited by Bloomberg. The goal is to bring the country’s total stock of borrowing below Italy’s by the end of the year.

The person, cited by Bloomberg and who asked not to be identified because no final decision has been made, said the repayments will include about 2.5 billion euros in loans from the European Financial Stability Facility and a 2.2 billion euro bond that matures in 2027. Greece will also cut 1.2 billion euros from its Treasury bill stock by Dec. 31, the person said according to the financial publication.

Building on June’s playbook

The move follows a similar step in June, when Greece prepaid 6.9 billion euros in bailout loans, a decision that helped push yields on its 10 year bonds below those of Italy, France and the United Kingdom.

Athens is using the same approach now, tapping into large fiscal surpluses and high excess cash reserves built up in recent years. Greece emerged from its decade long debt crisis and successive international bailout programs in 2018, and the government has since made reducing its debt burden and improving its credit standing a central economic priority.

Debt ratio revised lower

Greece is expected to beat its fiscal targets again this year. Its primary surplus, which excludes interest payments, is projected to exceed the target for another consecutive year, giving the government some room on spending while still allowing it to pay down debt faster.

The country’s debt to GDP ratio is now expected to fall to 137 percent this year, according to the Greek Public Debt Management Agency. That is down from the agency’s earlier forecast of 138.2 percent.

If the trajectory holds, Italy would become the most indebted country in Europe within months. Under current projections, the European Commission had expected that shift to happen only next year.

Policy speech and possible relief measures

Prime Minister Kyriakos Mitsotakis is set to lay out his government’s short term priorities in early September at the Thessaloniki International Fair, the annual trade exhibition that has become the traditional venue for Greek prime ministers to unveil economic policy and tax measures for the year ahead. He is also expected to present a broader plan for the country through 2030, ahead of elections scheduled for no later than mid 2027.

Should this year’s budget outperform expectations, the government may also announce additional relief measures for self employed workers and other social groups, according to the Bloomberg source, who cautioned that the plan is not yet finalized and remains subject to change. Any such measures would need to align with the European Commission’s fiscal framework, the person said, adding that the government does not intend to risk the credibility it has built in restoring Greece’s public finances since the debt crisis.

Lighter borrowing load ahead

The early repayments are also designed to ease future financing needs. The source said Greece’s borrowing strategy for 2027 is expected to look similar to this year’s, and that the country’s cash reserves are projected to exceed 30 billion euros by the end of 2026.

Source: tovima.com