How much Greece owes and how many billions it will draw from the markets

A loan strategy similar to that of 2021 has been planned by the financial staff for next year. The issues by the Public Debt Management Agency (P.D.M.A.) are going to reach 10 -12 billion euros, while the creation of a framework for the issuance of Greek government “green” bonds is in the works. The lending strategy is built given the high cash flow, the expected increased Community disbursements, and the relatively limited financing needs for 2022. The financing needs of the Greek government, according to the data, for the repayment of bonds and the payment of installments of bilateral loans in 2022 amount to 10.55 billion euros compared to 48.5 billion euros this year.

However, the goal of the ministry is to recover to investment level in the first half of 2023, without ruling out that this can be achieved in 2022. The staff is preparing for early repayment of part of the bilateral loans that Greece entered into with the eurozone countries in 2010. The aim is the early repayment of 2.64 billion euros in 2022. Further repayment of the IMF loan is also planned. Greece will have to pay 132 million euros at the end of 2022, 1.3 billion euros in 2023 and another 278 million euros in 2024. The country has already repaid about 6 billion euros in IMF loans.

Interest expenses

According to the state budget, the debt of the Central Administration is estimated to be 386,320 million euros or 218.4% as a percentage of GDP at the end of 2021, compared to 374,006 million euros or 225.5% as a percentage of GDP in 2020 , showing a decrease of 7.1 percentage points compared to 2020. In 2022 the amount of debt of the Central Administration is projected to reach 391,200 million euros or 209.8% as a percentage of GDP, showing a decrease of 8.6 percentage points compared to At the same time, the debt of the General Government is estimated at 350,000 million euros or 197.9% as a percentage of GDP at the end of 2021, compared to 341,023 million euros or 205.6% as a percentage of GDP in 2020, showing a decrease of 7.7 percentage points compared to 2020. In 2022, the debt of the General Government is projected to reach 355,000 million euros or 190.4% as a percentage of GDP, showing a decrease of 7.5 percentage points of GDP compared to of 2021.

According to the Ministry of Finance, the expenditures for interest on the debt of the Central Administration are close to the levels of 5,500-6,200 million euros, ie around 3.1% -3.8% as a percentage of GDP. The short-term borrowing costs of the Greek State, as reflected in the 13, 26 and 52 week bonds auctions, are at historically low levels with negative interest rates for all the duration of the issues. In the recent auctions in August and September it stood at -0.40% for the quarters, -0.39% for the semesters and -0.31% for the annual interest-bearing bills, which is due to the low international interest rates, the participation of Greek bonds in the ECB emergency program and the country’s successful exits in the capital markets throughout the current year.

The targets of the loan strategy for 2022 are:

  • ensuring the continuous publishing presence of the country in the international markets in combination with the utilization of the opportunities provided by the participation of the country in the extraordinary program of the European Central Bank,
  • the further provision of high liquidity issues while maintaining their already extensive natural maturation,
  • the further reduction of the borrowing margins, as well as the further assurance of the consistency of the Greek state as a state issuer with characteristics of a euro area country.
  • Utilizing the opportunities provided in the short-term part of the European curve in an environment of rising interest rates, making the most of the existing positions and the characteristics of the Greek public debt portfolio.
  • The creation of a framework for the issuance of Greek government bonds with an orientation of their loan revenues to “green” and “sustainable” development, with the aim of expanding the investment base and improving the country’s image in international markets.

The three debt scenarios

The debt sustainability analysis, according to the Commission, is still based on the Commission’s spring forecast and has been updated with new information on interest rates and issues issued since the last report.

Regarding the baseline scenario, it has improved marginally compared to the 10th report due to the further reduction of Greek forward interest rates in mid-August.

In the baseline scenario, debt is reduced to 57.6% of GDP by 2060 and gross financing needs remain below 15% of GDP in the long run.

In the higher risk scenario, debt is reduced to 97.6% of GDP by 2060 and gross financing needs are at 20% of GDP by the end of the 2050s.

In the low-growth scenario, the debt level does not stabilize and gross financing needs permanently exceed 20% of GDP by the end of 2040.

Returns and issues

According to the financial staff, the yield spread between the ten-year Greek and the corresponding German benchmark moved to the level of 110-120 basis points during 2021. At the end of September the yield difference is at the level of 100 units with the current yield of the ten-year bond being around 0.78%.

In January 2021, Greece reissued a 30-year bond with a nominal value of 1,400 million euros and a settlement value of 2,027 million euros with a private placement, followed in February 2021 by a consortium issue of a ten-year bond of 3,500 million euros, with a fixed interest rate of 0.75% and in March 2021 a consortium issue of a 30-year bond amounting to 2,500 million euros, with a fixed interest rate of 1.875%. Then, in May 2021, a five-year bond issue amounting to 3,000 million euros with zero interest rate was issued and in June 2021, the consolidated reissue of the ten-year bond amounting to 2,500 million euros with a yield of 0.888% followed. In September 2021, the five-year and thirty-year bonds amounting to 1,500 and 1,000 million euros, respectively, with a yield of 0.020% and 1.675%, respectively, were re-issued.

The short-term financing was realized with monthly issues of 13 and 26 weeks interest-bearing bills and 52-week quarterly issues, as well as conclusion of repos agreements mainly with the General Government bodies. As at 31/08/2021, the outstanding balance of EGED amounted to 12,600 million euros, while the repos amounted to 33,776.7 million euros.