IMF: Greek Payments on European Loans Must Be Deferred to 2040

IMF: Greek Payments on European Loans Must Be Deferred to 2040

Principal and interest payments on all European loans to Greece should be deferred until at least 2040, IMF says in draft debt sustainability assessment document obtained by Bloomberg News.
  • IMF proposes extension of the grace period on repayments of EFSF loans to Greece by up to 17 years, ESM loans by up to 6 years, and GLF loans by 20 years
  • Maturity of all European loans should be extended to 2080
  • Interest rate on EFSF/ESM loans to Greece should be fixed at a maximum level of 1.5% at least until 2045
    • For the bilateral GLF loans extended to Greece under first bailout, the spread over Euribor 50 bp should be eliminated
  • Without proposed relief measures, Greece’s public debt will rise to 293.8%/GDP by 2060 under baseline assumptions
    • Baseline scenario assumes Greece will achieve and maintain a primary budget surplus of 1.5%/GDP, privatization proceeds of EU5b to 2030
    • Given the high level of NPLs and weak quality of capital, additional bank capital needs of up to EU20b are projected to emerge, which could be covered from the unused bank buffer in the ESM program