Two milestones for Greece are included in the debt reduction strategy drawn up by the government’s economic staff.
The first concerns the goal that by 2029 Greece will no longer be the most indebted country in Europe. The second is the early repayment by 2031 of the 31.6 billion euros remaining to “erase” completely the obligations of the first memorandum, which should be paid in equal quarterly installments from 2029 to 2041. The next milestone in this process is the early repayment of €5.29 billion of installments in December 2025, which is part of the €31.6 billion remaining from the first memorandum.
The aim of these moves by the Ministry of Economy and Finance and the Public Debt Management Agency is to send another strong message of credibility to the markets, to shield the Greek economy from possible turbulence in the international environment and to leave behind past burdens that it would have to “carry” in the coming decade. Thus, more resources from the economy’s fiscal performance, instead of servicing past liabilities, can be directed to strengthening growth and distributing dividends to citizens.
“With the full repayment of the loans of the International Monetary Fund ( ed.), with the early repayment of the first expensive memorandum, with these types of actions, we are now defusing, we are defusing a risk that existed. And what was that? From 2032 onwards, the country will be pressured in terms of debt repayment, due to increased servicing costs,” said Kyriakos Pierrakakis during his visit this week to ODIHR.
High primary surpluses are key
Key to this strategy are the high primary surpluses achieved by the budget due to both high growth rates and the measures taken to curb tax evasion in recent years.
The 2024 primary surplus reached a record level of 4.8% of GDP or EUR 11.4 billion, significantly exceeding the original budget forecast. For 2025, the government and the Bank of Greece have already revised upwards this year’s initial budget estimate to 3.2% of GDP from 2.4% , while there are reasonable expectations that by the end of the year this forecast will be revised to even higher levels.
Strong downward trend in debt
Based on these data, it is expected that general government debt will continue to follow a strongly downward path in 2025. The target is to fall to below 145% of GDP from 153.6% in 2024. In 2023 general government debt stood at 163.9% of GDP and in 2022 at 177% of GDP according to ELSTAT and Eurostat data.
Due to high primary surpluses, the country’s cash reserves currently stand at a record high of €44.1 billion. This is the “safety cushion” which is the tool on the basis of which the plan for faster debt reduction has been drawn up.
The Greek government’s high cash reserves also allow ODHH to make targeted bond issuance moves related to debt management.
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