© Reuters. FILE PHOTO: A Greek national flag flutters in Oia, following the coronavirus disease (COVID-19) outbreak, on the island of Santorini, Greece, May 6, 2020. REUTERS/Alkis Konstantinidis
By Lefteris Papadimas
ATHENS (Reuters) – Greece will repay ahead of schedule 2.7 billion euros of loans owed to euro zone countries under the first bailout it received during its decade-long debt crisis, finance ministry officials told Reuters on Thursday.
Greece, the euro zone’s most indebted country, emerged from its third international bailout in 2018 and since then it has relied solely on bond markets to cover its borrowing needs.
This will be the first time it has repaid its euro zone bailout debt ahead of schedule. Doing so is part of its rebound strategy, though, as it wants to improve its debt sustainability.
“We plan to repay earlier 2.7 billion euros ($2.7 billion) of GLF loans due in 2023”, one of the officials told Reuters on condition of anonymity, adding that the payment will be made by the end of the year.
“In that way we will smooth out the maturity profile of our debt and lower our borrowing needs for next year in a rising interest rate environment,” the official added.
The euro zone and the International Monetary Fund together lent the country more than 260 billion euros during the crisis which broke out in late 2009, in exchange for tough austerity measures in Greece.
Athens paid off the IMF, which provided it with 28 billion euros between 2010 and 2014, in April, two years ahead of schedule and plans a similar strategy with euro zone bailout loans.
Euro zone countries provided Greece with 53 billion euros in bilateral Greek Loan Facility (GLF) loans during its first bailout, with maturities spreading to 2041. With the planned payment Greece will have paid back a total of 8 billion euros, the official said.
Borrowing costs for Greece in the 10-year debt zone have more than tripled since the start of the year, reflecting a broader rise in euro zone bond yields, with markets expecting at least a 50 basis-point rise by the European Central Bank by the end of the year to tame inflation.
The yield on the country’s 10-year benchmark bond was at 4.17% on Thursday.
Greece has a cash buffer of about 39 billion euros, enough to cover its borrowing needs for at least two years without tapping international bond markets.
It has borrowed about 7 billion euros so far this year through new bond sales and by reopening existing bonds.
($1 = 1.0023 euros)