The Minister of Finances Yannis Stournaras will initiate discussions for the possibility of debt relief at the Eurogroup session which is scheduled to take place on Monday, the 5th of May.
According to an unnamed high-ranking Finance Ministry officer, while Mr. Stournaras will make the request, “the process is long” and could well carry on until December 2014. The European elections and potential changes in the European Commission may also affect the outcome of the request.
With Germany expected to veto the possibility of a “haircut”, the Greek government’s proposal includes an extension of debt repayment to 50 years and to convert the currently low, variable interest rate to a fixed one.
The loans Greece received in the first bailout (worth 52.9 billion euros) must be paid out between 2020 and 2041, while the loans of the second bailout (worth 139.9 billion euros) have an average repayment deadline of 30 years. By extending repayment to 50 years, the savings from annual repayment needs could be 6 to 7 billion euros.
At present Greece’s variable interest rate is 0.82%, which is derived from the 3-month Euribor rate + 0.50%. While the rate is low, it is expected to increase by 2% over the next fivers, which will have a considerable impact on the cost of the first bailout loan. The Ministry’s goal is to secure a 1% interest in conjunction with an extension of loan repayment deadlines.
