The boards of the European Stability Mechanism (ESM) and European Financial Stability Facility (EFSF) agreed on Monday to allow Greece to repay earlier a part of its expensive loan to the International Monetary Fund (IMF), without paying an equal amount to the two organizations.
Under the ESM and EFSF loan agreements with Greece, if the country repays the IMF early, it would have to repay a proportional amount to the two institutions, but the waiver granted by the ESM and EFSF on Monday means that the country will not be required to do so.
“Greece’s early partial repayment to the IMF will be beneficial for both Greece and the ESM. It will generate savings as Greece can now finance itself on the market at a lower cost compared to the cost of servicing the tranche to be repaid to the IMF,” the ESM’s Managing Director and EFSF CEO Klaus Regling said in a statement.
“This will improve Greece’s debt sustainability and should be positively perceived by financial markets.”