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  • 13.7 billion euro cushion for Greek return to markets

    Public debt is expected to increase by 13.7 billion euros in the first months of 2018, according to the budget tabled in parliament yesterday by the government.

    ΤοΒΗΜΑ Team

    Public debt is expected to increase by 13.7 billion euros in the first months of 2018, according to the budget tabled in parliament yesterday by the government.

    The budget indicates that this amount will be drawn from the European Stability Mechanism (ESM), from new bond issues that that will be spent on creating a cash buffer, and paying off delinquent debt of the public sector.

    In the second half of this year, the central government’s debt will increase by 3.2 billion euros for the same reasons, the creation of security reserves and debt payments.

    Hence, state debt is projected to reach 343 billion euros within 2018.

    The second part of the government plan provides for stabilisation and reduction of expenditures on interest payments.

    “The expenditures on interest payments on the debt of the Central Government after 2012 were between 5.5 billion and six billion euros, while the level of expenditures on interest are about three percent of GDP, and in 2018 will be limited to 5.2 billion euros, or 2.8 percent of GDP,” Alternate Finance Minister Yorgos Houliarakis said, after delivering the budget to parliament.

    This reduction is due to the March, 2012, debt write-down, with private sector involvement (PSI), and the repurchase of debt in December, 2012, the lowering of interest rates of the support mechanism, and the postponement until 2023 of interest payments on ESM loans.

    The interest payment amounts are expected to be capitalised and distributed over about 20 years, in the framework of medium-term measures for Greek debt relief, which will be negotiated with creditors before the end of the current fiscal programme next summer.

    The budget aims to restore the yield curve of three billion euros worth of Greek five-year, fixed interest rate bonds, with which Greece returned to the markets after about three years.

    The yield curve is expected to be enriched with the impending swap of 20 bonds from the PSI write-down for five benchmark bonds, in the framework of the Liability Management Exercise.

    Central government debt will reach 332.8 billion euros this year, or 186.4 percent of GDP at the end of 2017, compared to 326.3 billion, or 187.3 percent of GDP in 2016.

    For 2018, the level of central government  debt is projected at 343 billion euros, or 185.7 percent of GDP, a 0.5 percentage point drop from 2017

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    Helios Kiosk