Greece is preparing to begin early repayment of €4.7 billion in loans from the European Financial Stability Facility (EFSF), part of the country's second bailout program, after paying off €6.94 billion early in mid-June on a separate €52.3 billion bilateral loan with the Eurozone.
The total EFSF loan stands at €111 billion, with a grace period on both principal and €25 billion in interest lasting until 2032. By starting gradual repayment now, the Greek government aims to smooth out payment obligations after 2032, particularly after 2038, when capital and interest costs were expected to rise sharply.
The first payment, worth €2.5 billion, is due in September and has been funded through international borrowing gathered since the start of the year. It will coincide with the start of a second round of assessments of the Greek economy, with rating agencies DBRS, Moody's and SCOPE due to issue new evaluations next month.
Rating agencies and Greece's partners have been informed of the early repayment plan, as well as an informal target for Greece's debt-to-GDP ratio to fall enough by year end to become the second lowest in the eurozone, behind only Italy. The early repayment is expected to send a positive signal to markets at a difficult time for European public debt, with Greece moving against the general trend.
Second Installment
A second installment of €2.2 billion is due by mid-December, funded through market borrowing and part of Greece's cash reserves. It will coincide with an official forecast placing Greek debt at 136.7% of GDP, or possibly lower, in the final draft of the 2027 budget, confirming Greece would have the second-highest debt in the European Union after Italy.
Despite total early repayments of €11.64 billion for the year, Greece's cash reserves are expected to remain above €30 billion by year end, enough for markets to expect Greece can cover its obligations for the next three and a half years without new borrowing. Next year's borrowing program is not expected to exceed €10 billion, up from an expected €8 billion this year.
