The strategic moves in debt to accelerate the investment grade

By Tasos Dasopoulos

With some delay, due to the absence of the new German government, the Ministry of Finance begins to unfold in the coming months the plan to exit the enhanced supervisory regime and achieve a minimum investment grade.

The plan has a point of reference, the most difficult of the budget figures, the debt as it is the one that had the largest increase (26% of GDP) in the months of the pandemic. Officials of YPOIK emphasize that the market essentially invoices Greek bonds as if the country already had the investment grade. However, official certification by rating agencies is also needed, as the persistence of price increases increases the risk of a change in the course of monetary policy, possibly in 2022. In this regard, the ministry has begun to implement its plan, which has as its first step the exemption from memorandum debts.

With the Eurogroup approving the early repayment of € 7.1 billion in IMF (€ 1.8 billion) and GLF (€ 5.3 billion) the day before yesterday, the procedural part remains to be developed (ESM recommendation the formal approval of the Eurogroup and the parliamentary procedure) to close the transaction. From this move, Greece will have a profit much greater than the equivalent debt reduction and a significant reduction in borrowing costs (since the expensive debt will be reduced) at the end of next year.

The first additional gain is that the debt to the IMF is zero. Repaying the balance of IMF loans is the first milestone a country must achieve in implementing memoranda to prove to the markets that it is finally leaving its fiscal problems behind. In fact, in addition to repaying the old debt, Greece aims to “lend” the IMF with an additional 2 billion euros to officially participate in the New lending arrangements of the Fund, ie in the rescue programs of other countries.

The profit and at the same time an additional sample to all, that the economy has now entered a “virtuous circle” and the debt is that the second official lender, the EU, will start repaying early. Greece has borrowed about 230 billion since 2010. ., through the bilateral loan, the EFSF and the ESM loans.

With 5.2 billion euros, YPOIK will repay 10% of the bilateral loan of 52.3 billion that the country took 11 years ago. This loan will be repaid already this year (660 million euros will be given in 2021) and the money that will be allocated correspond to the obligations of 2022 and 2023. of 52.3 billion euros before the agreed deadlines, perhaps by the end of 2022.

At the same time, the appearance of Greece in the markets will be ensured with a “comfortable” lending program of about 12 billion euros with the main goal of increasing the liquidity of Greek securities which does not currently exceed 28-30 billion euros (with the exception of its securities PSI) to further reduce lending rates.

Exit from enhanced supervision

Although it is not an element of debt, the enhanced supervision regime that Greece has been in since the summer of 2018, is another memorandum commitment that only our country has. The lifting of the special regime for Greece from next summer will eliminate another remnant of rescue programs, showing that Greece no longer needs close monitoring.

All this, in combination with the reduction of non-performing loans to a single-digit percentage within the next year, is expected to remove the last reservations of rating agencies for Greece.