The Minister of Finances Yannis Stournaras is expected to officially initiate discussions at the Eurogroup scheduled for the 5th of May regarding debt relief.
While Mr. Stournaras is taking the initiative, a Finance Ministry officer claims that negotiations “will be long” and a final decision may come in December. Mr. Stournaras intends to support his claims with new data regarding the banks, which will be available at the end of the year, when the European stress tests have been conducted.
With Germany having ruled out the possibility of a new “haircut” of Greece’s public debt, the coalition government is going to focus its efforts in extending loan repayment to fifty years and changing the current variable interest rate to a fixed rate.
The loans from the first bailout (GLF) were worth 52.9 billion euros and must be repaid between 2020 and 2041 (17 years average), while the second bailout loan (EFSF/ESM) worth 139.9 billion euros must be repaid in about 30 years. Extending repayment to 50 years means that the government will pay about 6 to 7 billion euros less on an annual basis.
As for the variable interest rate, which is currently about 0.82% (rate of the 3month Euribor + 0.50%), the coalition government wants to change it to a fixed rate of about 1% for 15 to 50 years (assuming the extension is approved). The variable rate is expected to increase by up to 2% in the next years, which will greatly increase the first bailout loan.
