The benefits of premature repayment of loan of the first memorandum, was described by Deputy Minister of Finance Thanos Petralias, answering a question by SYRIZA MP Nikos Pappas.
According to a statement by the Ministry of Finance, the Greek State on bilateral loans of European GLF countries, an initial amount of € 52.9 billion, has already repaid € 21.3 billion, and has also made full repayment of loans to the IMF.
As has been announced, the remaining amount of these loans amounting to EUR 31.6 billion will be repaid prematurely by 2031, that is, a decade earlier than normal installments in the year 2041. Thus for the current year 2025, the Greek state will make a $ 5 of the Greek State in December, in December, in December, in December, in December, This is about the end from 2033 to 2041.
What will the country win by early repayment?
Under current market conditions, repayment is expected to bring about a direct reduction in general government debt by about 2.2% as a percentage of GDP, as well as savings by reducing annual interest costs by approximately EUR 150 million for a 12-year medium period.
In addition, early repayment reduces the risk of interest rate and the risk of debt refinancing and contributes to the further improvement of the Greek economy’s debt to international ratings.
With the early repayment of the loans of the first memorandum following the complete repayment of IMF loans, the risk of increased debt service costs from 2032 onwards is halted.
With this move, the Greek State passes a message of further safeguarding in institutions, evaluation agencies but mainly to the international investment community that it is moving with foresight and insight, timely and safely, in order to further reduce its annual future financial needs.
Why is the premature repayment of GLF loans?
GLF loans are raised on more expensive terms than other official loans in the country. Today the country’s public debt has an annual cost of service of 1.73% and a weighted average of 18.8 years. At the same time, the GLF loan rate is floating and corresponds to Euribor now 0.5%, which in 2024 exceeded 3%.
Mr Pappas’ report to service interest rates including 1.5% of Swap does not take into account that this interest rate, as the public debt management organization states, includes the Swap interest rate acts, the benefit of which remains and is transferred to balances after debt. Consequently, repayment of the loan reduces the burden of the annual interest paid by the state equal to the amount of the Euribor+0.5%interest rate.
In addition, Mr Pappas ignores his position that debt repayment is a financial, namely cash transaction and is not a financial transaction. According to Eurostat rules, financial transaction is a transaction that is not counted in either primary surplus or in the total deficit or spending targets. On the contrary, public spending are fiscal transactions that reduce the surplus or increase the overall deficit, count on the expenditure target and also increase the country’s public debt.
Therefore, two concepts of sizes cannot be confused and does not replace each other. Financial expenditure burdens the financial outcome of the state, the costs index and increases the debt, while the loan repayment is a financial transaction that is not counted on the budgetary outcome, nor the cost index and reduces debt.
The viability and positive prospects of Greek public debt are fully reflected by the continuous decline of Greek government securities’ spreads over other eurozone countries. They are also reflected in the ongoing upgrades of the Greek economy’s debt, especially during the last two years that the investment level has been reached.
The benefit of de -escalation is not theoretical, but it consolidates reduced interest payments and improved credibility of the country, which ensures higher growth, less weights for the future and ultimately more prosperity for citizens.
This is a huge conquest due to the sacrifices of the Greek people and will certainly neither go to lose.