A strong message to markets is sent by Kostis Hatzidakis’s revelation to the international news agency Bloomberg that in 2024, the state budget will close with a higher-than-expected primary surplus of 2.4% of GDP instead of the initial target of 2.1%. This performance, according to the Minister of National Economy, also allows for a higher increase in net government spending in 2025 “just above 3%” set as a “cutter” by Brussels. At the same time, he announces an early debt repayment of €8 billion by the end of 2024, but also that “the government’s intention is to abolish the special rights the state has in the National Bank”, with the apparent aim of maximizing the benefit of the upcoming privatization in October.
In an interview with Bloomberg, Kostis Hatzidakis predicted that public debt will fall “close to 130%” of gross domestic product by the end of 2028, supported by an economy that outperforms relative to others.
According to what Bloomberg reports, Greece’s debt peaked at 207% of GDP in 2020 and is already estimated by the government to fall to 152.7% this year. Reducing the size of the debt as Hatzidakis predicts, raises the prospect of a debt reduction below Italy’s unless the country’s fiscal path changes drastically.
Along with being removed from the “junk” category last year, the prospect of Greece no longer standing out as the most indebted sovereign country in the region would be a remarkable turnaround for a country that was once nearly bankrupt and in danger of leaving the euro.
The new forecasts will be included in the fiscal plan to be submitted to Brussels in early October.
What is helping Greece right now is an economy that is outperforming most European economies. The economy grew 1.1% in the second quarter, while the eurozone as a whole grew just 0.2%.
Primary surplus at 2.4%
Hatzidakis now estimates that the primary surplus of the budget – that is, revenue minus expenditure, excluding interest – will reach 2.4% of GDP this year, instead of the initial estimate of 2.1%. This gives the government the ability to increase spending.
“Thanks to the better-than-expected budget performance, we can have a higher spending increase compared to the initial estimates,” Hatzidakis said.
Greece will be able to increase its net spending “a little over 3%” in 2025 – from the initial forecast of 3% – while it can continue to increase this rate on average until the end of 2028, the minister observed.
The government is also proceeding with the early repayment of bailout credits worth a total of €8 billion, covering loan repayments from 2026 to 2028. This will be the third time the repayment of aid received under the first bailout program in 2010, known as the Loan Facility for Greece, has been accelerated.
All these decisions underline the strength of the economy and the government’s determination to continue on a path of fiscal prudence, Hatzidakis said.
“This message is fully understood by the rating agencies, various international organizations and investors abroad,” he added.
The government is also close to completing a rapid privatisation program in the banking sector that began almost a year ago with the state’s complete exit from Eurobank Ergasias Services and Holdings SA, Alpha Bank and Piraeus Bank.
In early October, Bloomberg reports, the Hellenic Financial Stability Fund – a bank recapitalization tool created at the beginning of Greece’s bailout programs – plans to move forward with a further sale of a stake in National Bank of Greece SA.
“A further sale of shares from those held by the HFSF is likely to happen in October – provided, of course, that market conditions are favourable,” Hatzidakis said, without disclosing further details on the exact timing or size of the offer.
In order for the National Bank not to have a competitive disadvantage compared to the country’s other three main banks, “it is the government’s intention to abolish the special rights that the state has in the bank,” the minister added, according to the publication.
