The reduction of the Greek debt has started in practice

The reduction of the Greek debt has started in practice

The reduction of public debt has started in practice, as a result of the government’s agreement with the institutions, which was achieved last summer. The public debt of 2019 is projected at EUR 323.5 billion or 167.8% of GDP, 12.6 percentage points below 2018. For this year, it is estimated at 335 billion or 180.4% of GDP, against 317, 41 billion or 176.1% of GDP in 2017. This year’s increase is due to the creation of the cash buffer, which will be partly used in 2019. In addition, according to ESM head Klaus Regling, by 2060 the ratio of Greek debt to GDP will be reduced by 30%.

Financial needs covered for 2 years

According to the budget of the Greek government submitted to the House, taking into account the existing high Treasury reserves held by the State, which, even under extremely conservative estimates, are sufficient to cover its gross financing needs for at least the next two years, publishing policy targets for 2019, but will also later, will focus on bond issues with high liquidity and volume, maintaining a representative yield curve for Greek government securities, as well as the continuous and uninterrupted presence of the State in international capital markets as an issuer of government securities, while providing the necessary transparency and predictability in the investment community.

Typical ESM approval

At the same time, the implementation of the package of medium-term debt relief measures for Greece was approved today by the Board of Governors of the European Financial Stability Facility (EFSF), according to a statement from the Fund. These are the measures adopted by the Eurogroup finance ministers at the Eurogroup on 22 June 2018.

The measures

It should be noted that these measures concern:

(a) the mechanism for the conditional abolition of the step-up of the interest rate margins associated with the loans of the second Greek program from 2018 onwards,

(b) the further extension of the 10-year grace period for interest and depreciation in respect of the EFSF loans of EUR 96.4 billion; and

(c) the prolongation of the average maturity of the aforementioned loans by 10 years.

Regling: 30% reduction in the debt to GDP ratio

“We estimate that the overall package of medium-term measures agreed by Ministers last June will lead to a reduction of Greece’s debt ratio to GDP by about 30 percentage points by 2060. We also expect Greece’s gross financing needs to decline by eight percentage points over the same horizon”, said the CEO of the European Stability Mechanism and EFSF chief, Klaus Regling./IBNA