Finance Minister Yannis Stournaras is due to ask his eurozone counterparts Monday to begin considering further debt relief for Greece, with the government already having drafted a number of options to reduce the repayments the country faces in the years to come.
Having achieved a primary surplus of 1.5 billion euros in 2013, Greece will demand that the Eurogroup lives up to its November 2012 commitment to examine other ways of reducing the country’s giant debt burden of roughly 175 percent of gross domestic product. It is highly unlikely, though, that Stournaras will get an immediate answer. The matter will probably be referred to the Euro Working Group, with the technical team that advises eurozone finance ministers being asked to come up with proposals on how to reduce Greece’s debt.
“Discussions will begin but there are a number of preconditions to be met, not just the primary surplus,” a high-ranking European Union official told Kathimerini. “That is why the negotiations will take place when the next [troika] review [of the Greek adjustment program] has been completed.”
Sources have told Kathimerini that there is some reluctance within the eurozone to make any firm commitments now because of the proximity to the European Parliament elections on May 25.
Reducing Greece’s debt is a politically sensitive issue in a number of eurozone countries. Also, Greece’s lenders feel that they can use the issue of debt relief for leverage over the next few months to ensure that Athens meets its structural reform commitments.
Although there is not likely to be a definitive answer regarding Greek debt lightening until the fall, Athens has worked on some proposals.
The first part of the Greek plan consists of stretching the maturity of 192.8 billion euros in loans the country has received from the eurozone to 50 years. The Greek Loan Facility (GLF) loans amount to 52.9 billion euros and have an average maturity of 17 years. The 139.9 billion euros Greece has received from the European Financial Stability Facility (EFSF) have an average maturity of 30 years.
An extension could reduce Greece’s debt repayments over the next couple of decades by about 6 billion euros a year.
The second part of the proposal consists of switching to a fixed interest rate on the GLF loans. Currently, Greece is paying a rate of 0.83 percent (Euribor plus 0.50) but as the Euribor rate is expected to rise over the next few years, Athens wants to ensure lower repayments by fixing it at a low rate.