Following the early repayment of €6.94 billion of the €52.3 billion bilateral loan with the Eurozone last June, Greece plans to make an early repayment of €13 billion of debt during 2026, with the aim of reducing its debt to levels below those of Italy by the end of the year. By making use of fiscal surpluses and high liquidity, it aims to reduce the debt-to-GDP ratio to 137% this year.
According to officials at the Ministry of National Economy and Finance, given that for every €1 billion of early repayment the country saves €30 million (at the new borrowing cost), it saves a total of €360 million on the €13 billion. Over seven years, it saves more than €2 billion from this alone.
If the low spreads are also taken into account, along with the credibility factor that attracts major investors, this strategy yields nothing but benefits.
Overall, from 2019 to 2025, Greece has made early repayments of loans totaling approximately €36 billion.
With this move, the Greek state sends a message of further reassurance to the institutions, rating agencies and, above all, the international investment community that it is acting with foresight and prudence, in a timely manner and at a safe juncture, in order to further reduce its already diminished annual gross financing needs, including beyond 2032.
Early repayments will continue in the coming years so that the loan in question can be fully repaid by 2031, instead of the original plan of 2041.
In a recent report, the German credit rating agency Scope Ratings “sees” a significant decline in Greek debt. It estimates that it will fall to 107% of GDP in 2031, from 136% this year and 128% in 2027. The result of this rapid reduction will be that by 2031 Greece will have lower debt not only than Italy — which it is expected to overtake as early as this year — but also than France and Belgium, moving closer to the euro area’s average debt level. For the euro area, debt is expected to stand at 90% in 2031, the same level as in 2027.
It should be noted that next month the Greek economy will be assessed by the rating agencies DBRS, Moody’s and SCOPE, while the assessments will continue in October by Standard & Poor’s and in November by Fitch.
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