New Commission assessment could slash debt
A positive EU report on the economy may forgive some 5.2 billion euros of Greece’s EFSF dues
The new European Commission assessment of the Greek economy will be published next Tuesday, November 22, being the first in the framework of the simple post-program supervision. According to sources, it will come with significant national debt relief, amounting to 5.2 billion euros.
That relief concerns the deletion of the 2% interest margin, which had been imposed on the loan that the country had taken in 2012 from the European Financial Stability Facility (EFSF) to buy back debt. In particular, Greece borrowed €11 billion with which it bought back bonds worth €31 billion, thereby erasing a debt of €20 billion. However, it was burdened with this interest, known as the “step-up,” which will now be deleted, as a result of the positive – as expected – evaluation.
That relief would be most welcome, as it partially offsets the extra burden Eurostat is about to include in the national debt: The European statistical service is said to be determined to finally add to the debt part or all of the state collateral in the securitization of the bad loans, in the context of the Hercules program, amounting to €18.3 billion.
Debt containment is, moreover, largely facilitated by inflation, combined with high growth (measured as a percentage of inflated gross domestic product). This is expected to be reflected in the debt sustainability analysis included in the evaluation. According to the European Commission’s fall forecast, Greece’s debt will fall from 194.5% of GDP in 2021 to 171.1% of GDP this year, 161.9% in 2023 and 156.9% in 2024. Consequently, even if it is burdened by the Eurostat calculation, it is not expected to be derailed; a finding with which the European institutions also agree, according to information.
The upcoming assessment will also be accompanied by the final return of the central banks’ profits from Greek bonds, the well-known SMPs and ANFAs, amounting to around 700 million euros. Both of these gifts will be given in December, by decision of the European Stability Mechanism.
