According to a research note from the House Budget Office, significant developments are identified in the composition of investors who are holding Greek debt In recent years, which have multiple interaction with the availability of the fiscal space.
“It is important that 70% of Greek public debt was in the foreign official portfolios in late 2024, as a result of the restructuring agreements during the crisis.
This section of debt is locked at fairly low interest rates (much lower than the market), forming a low real debt service interest rate. In addition, the Greek debt portfolio is characterized by a very high average ripening, which was estimated at 18.8 years in late 2024. Even if the deferred interest payments of EFSF loans were included, the average interest rate in 2024 (on a cash base) was only 1.73%.
If this is compared to the average market interest rate for the 10 -year bonds, which stood at 3.4% in the same year, it appears that Greece enjoys a “stability” of 1.67% and highlights the enormous savings of debt service costs. The particularly favorable composition of Greece’s investment base, which is fitted with the presence of investors who “buy bonds and hold them” in the long -term prospects, coupled with the ECB’s support measures, contribute to the shielding of the Greek bond market “.
However, as highlighted in the analysis, while Greece benefits from favorable investor composition and debt service conditions, future debt -rates and increasing European lending costs may create additional pressure on the country’s fiscal position. In addition, “in today’s conditions of increased geopolitical uncertainty, the projected increase in EU governments’ issuance to fund not only defense costs and infrastructure costs but also the energy transition will probably lead to higher borrowing costs, at least short -term costs.”
That is why the note of the State Budget Office in Parliament observes that the commitment to fiscal prudence, the utilization of EU financial mechanisms, the continuation of debt reduction efforts and the acceleration of growth reforms is crucial.
The House Budget Office also characterizes the “welcome development” of the European Commission’s Plan Rearm Europe “In particular, if additional defense costs can be funded through EU resources”, calling for a public debt agreement beyond the 150 billion -euro portfolio.
It also stresses in the findings of the research the need to strengthen defense at European level, which creates a significant fiscal challenge for all EU member states, including Greece, which has been a higher percentage of GDP over defense over other European countries over time. It is noteworthy that in 2022 our country’s defense spending amounted to 2.6% of GDP, consistently overcoming NATO’s target for costs of at least 2% of GDP and the European average was only 1.3% of GDP.
“In this fiscal exercise there should be no winners and losers. In order to gain the Commission’s plan, the majority of EU member states should increase its defense spending. At the same time, EU Member States that have historically allocated a high proportion of their GDP (such as Greece, Poland, Estonia, Lithuania and Finland), at a price for reduced public spending in other areas, must be fair.
It is in the interests of Greece, which is already one of the countries with the highest defense spending in the EU, to argue that designed defense spending from countries traditionally have a higher GDP rate in defense than the European average should be addressed in the same way that will be treated with the same way.
At the same time, there is a need for “to take Europe as a whole a bold step towards the issuance of a common debt, beyond the 150 billion -euro portfolio announced in the Rearm Europe Plan”, since in the medium term no country can increase its defensive costs in medium term. At this point, it is commented that the role of the European Central Bank (ECB) in supporting European bond markets will also be decisive if the risks of upheaval and fragmentation are re -intensified, “But” in the event of new inflationary shocks, complications that could limit the capacity of the ECB. “