Greece should tap the markets

Our debt is about 356 billion euros when our GDP is 175 billion. The balance of our debt to the IMF is about 10 billion euros, almost 3% of our total debt. Its repayment will be completed in 2024 and this will be done gradually over the next 5 years. Of all the debt we owe to various public bodies (ECB – European Central Bank, EFSF – European Financial Stability Facility, ESM – European Support Facility) this is the most expensive.

Cost of IMF

We pay to the IMF interest rates that start just under 4% and in fact for a part of almost 3 billion euros we pay 4.9%. These are loans that are very expensive and the question arises why we do not do something about it. The Ministry of Finance has announced that it intends to borrow for 10 years and persistently argues that it will do so when and if market conditions allow. Waiting for the infamous best days does not dare to take it for granted. To enter the markets with 5 years, that is with a significantly lower interest rate, today at 3.10%, and to repay gradually but earlier the most expensive part of the IMF loans. What did not happen last fall, in my opinion, may well be happening now.

Benefit of repayment

For the 3 billion we pay 4.9%, the benefit would be almost 1.8%, ie 54 million euros and the benefits for the rest are also worth mentioning. Instead, they wait for the best days without thinking that the enemy of evil is the worst. 2019 will most likely be a year when interest rates from the ECB will rise and what seems expensive today, tomorrow may seem cheap. Let us also not forget that our relations with the markets must be stable and not ephemeral. We can not go out here and there, but constantly, and with the aim of reducing the cost of borrowing even for a small part of our debt. Finally, our entry into the markets will also help the banks that have been particularly competitive in the stock market lately, to raise funds and reduce their exposure to indirect government borrowing through interest-bearing bills. The logic of the “cushion”, ie the stock of 26.5 billion euros is dangerous in terms of the purpose of our post-memorandum existence.

We have to go to the markets and in consultation with the ESM this can be done initially for the debt part of the IMF. Unless we do it for other purposes. And because beyond the Prespa agreement, the economy continues to exist, it is good not to procrastinate.

Published on on 21/1/2019

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