Our country will enjoy multiple and measurable benefits from the new early repayment of public debt, amounting to €5.29 billion, which is scheduled to be completed on December 15.
The path was opened with decisions made last Tuesday by the European Stability Mechanism (ESM) and the European Financial Stability Facility (EFSF), which warmly welcomed the Greek Government’s request to proceed with early repayment of part of the GLF (Greek Loan Facility) loans from the era of the 1st Support Program.
By repaying this amount early, this year instead of from 2031 onwards, the Greek State:
– reduces its debts faster,
– limits its exposure to the risk of future interest rate increases while, additionally
– the State Budget and taxpaying citizens are immediately relieved from payments worth €1.6 billion which, in total according to the program, they would have paid from 2026 and in subsequent years, exclusively for interest on this specific amount (€5.29 billion) if it had not been “written off” earlier.
However, the gains do not stop there: as ESM Managing Director Pierre Gramegna emphasized when announcing the decisions, “this additional early repayment of the GLF loan sends another positive message to financial markets.” In practice, this prepares the ground for new upgrades from international rating agencies in 2026, which the country needs to rise higher in the investment grade – where it just returned after fifteen years of degradation of Greek bonds to “junk” category.
What will happen with the new early repayment of public debt
The new early repayment move concerns GLF loans, totaling €52.9 billion. These formed the core of the first financial support to Greece in May 2010. They were concluded bilaterally with 14 eurozone countries and are being repaid to them, as the EFSF and ESM had not yet been established.
Beyond the regular payments each year, based on the “schedule” of debt maturities and payments, the Greek State is preparing in a few days to repay early an additional €5.29 billion, which normally should have been paid off in the years 2033-2041.
The €5.29 billion represents only a part (one-tenth) of the bilateral GLF loans that our country received during the period 2010-2013.
However, they will be paid off from this year already, immediately relieving the country from interest worth €1.6 billion, which it would have gradually paid over the next 8 to 16 years.
How does this benefit arise?
Based on the characteristics of the Greek Loan Facility (GLF), the €52.9 billion loan is burdened annually with a floating interest rate, which today stands at 2.3%-2.4% (but had reached above 3% in 2024).
With such interest rates, for just these €5.29 billion that will be repaid early in a few days, the country (State and taxpayers) has already been burdened with interest of over €1.8 billion so far, from the period 2010-2013 when it borrowed them.
After early payment and their deletion from the country’s debt “books,” however, the country will no longer pay anything at all for these loans. Automatically, the State Budget is relieved from interest that, with current data, is calculated at approximately €140 million annually. Given that the country would have had to pay this interest for an average remaining duration of 12 years (the average between 8 and 16 years that remained for these specific loans to mature), this results in relief of €1.6 billion from interest in these years collectively, until 2041.
Thus, with one move, it simultaneously “erases” obligations of €7 billion: it pays off loan capital of €5.29 billion but, at the same time, is relieved from interest that would have exceeded €1.6 billion in total.
€3.5 billion less for interest… with more to follow
This move is not isolated. It is part of a broader plan of early repayments, aimed at relieving the country from high-cost loans and improving the profile of Greek public debt.
Already, three early repayments of European loans totaling €15.9 billion have preceded (in the years 2022-2024) and with the new one they will reach €20.1 billion. While an additional €7.9 billion has been given for early repayment of the country’s bailout loans from the International Monetary Fund, resulting in the complete write-off of debt to the Fund.
Calculating correspondingly the benefits from early repayments that preceded until 2025 (approximately €600 million from the GLF repayment in 2024, over €200 million in 2022-2023, but also almost €1 billion from the total early repayment of €7.9 billion in IMF loans earlier), Greece has repaid loans of €29 billion faster, but has also written off interest of €3.5 billion so far – an amount that increases as this strategy continues in the coming years.
Why on debt and not on benefits
Another advantage of early repayment is that it does not burden the State Budget. As the ESM/EFSF decision states, the early payment on December 15 to the countries that lent to Greece in 2010 will be made with money from the special account where the reserve of “liquid” (cash) available funds of the State is kept, which was created towards the end of the Memoranda with the exclusive purpose of managing and paying public debt. From this account came the €29 billion so far, but 2025 will close with a record reserve exceeding €35 billion, as estimated by the Ministry of National Economy and Finance.
However, these payments also have some other characteristics which, although very important, are usually ignored in public discourse.
For example, the question is often raised why these available billions (either the €5.29 billion that will be given this year or the €29 billion in total over the last four years) are given to repay debts to creditors early, instead of being directed to benefits, salary increases or allowances, etc.
Although it provokes legitimate interest, the comparison between debt repayment and other state expenditures does not hold and is not suitable for discussion, as these are completely separate categories that do not substitute one for the other.
The reasons are many, while the main one perhaps lies in the distinction between financial and fiscal transactions, according to Eurostat rules and the Stability Pact.
Based on these rules, every debt repayment constitutes a financial (cash) transaction: it is not counted in the primary surplus, nor in the total deficit, nor in expenditure targets. Especially each early repayment is “one-time use,” would happen anyway at a determined date in the future. However, it has the immediate result of reducing debt, and reduces expenditures for interest in the future.
Exactly the opposite applies to other state expenditures (benefits, salaries, pensions, etc.) which constitute fiscal acts and transactions: they reduce the surplus, increase the deficit and are counted in the annual limit (“ceiling”) of expenditure increases, as they burden public debt and create future needs for new loans and new interest expenses.
Therefore, the funds of the special account are not suitable for fiscal expenditures of the state. However, as competent officials at the General Accounting Office of the State emphasize, their utilization for early repayment not only drastically reduces debt, but saves future resources from interest, which give “breathing room” to the Budget which, subsequently, can finance sustainable policies for future generations.
ANA-MPA
