Greece Repays €5.29 Billion in Early Bailout Loan Payment, Signals Fiscal Strength

Early Repayment Marks Fiscal Milestone

Greece has successfully executed an early repayment of €5.29 billion in loans originating from its first bailout program, a significant step in the nation's ongoing efforts to reduce its public debt and optimize future interest costs. The payment, made on Monday, December 15, targeted bilateral loans under the Greek Loan Facility (GLF), which were originally scheduled to mature between 2033 and 2041.

This proactive measure is projected to yield substantial savings, with an estimated €1.6 billion in interest payments saved through 2041. Additionally, the repayment is expected to provide an annual budget relief of approximately €135 to €140 million. The funds for this repayment were drawn from Greece's special cash reserve account, established at the conclusion of its third adjustment program.

Strategic Debt Management and Market Confidence

The decision to proceed with this early repayment received approval from the Boards of Directors of the European Stability Mechanism (ESM) and the European Financial Stability Facility (EFSF). These bodies also waived proportional repayment obligations on other loans, allowing Greece to focus on the GLF debt. This move is part of a broader strategy by the Greek government to clear its remaining GLF obligations by 2031, a full decade ahead of their original maturities.

Prime Minister Kyriakos Mitsotakis had committed to early debt repayment in 2023, emphasizing the country's fiscal recovery. Finance Minister Kyriakos Pierrakakis articulated the government's ambition, stating that the goal is to 'no longer be Europe's most indebted country in the coming years'.

Economic Impact and Future Outlook

The early repayment is anticipated to reduce Greece's public debt by approximately 2.2 percent of GDP. This contributes to projections that the country's public debt-to-GDP ratio will fall below 120 percent by 2029. Pierre Gramegna, Managing Director of the ESM, commented on the development, stating, 'Greece continues to make significant progress in strengthening its economy. This additional early repayment of the GLF loan sends another positive signal to financial markets, improves Greece's debt structure and reflects the country's improving fiscal position.'

This latest repayment follows Greece's earlier action in 2022, when it repaid its loans to the International Monetary Fund (IMF) two years ahead of schedule. The consistent efforts to manage and reduce its debt burden are aimed at bolstering investor confidence and potentially leading to further credit rating upgrades in the coming years.