Emergency loans: Greece repays IMF debt ahead of schedule

Greece has repaid its entire debt to the IMF almost two years ahead of schedule. The country is by no means rid of its debts from the financial crisis.

Greece yesterday repaid emergency loans it had received from the International Monetary Fund (IMF), almost two years ahead of schedule. The repayment of the outstanding 1.85 billion euros “closes the chapter” of the sovereign debt crisis of 2010, said Finance Minister Christos Staikouras.

At the end of March, the country received the green light from the European Stability Mechanism (ESM) and the European Financial Stability Facility (EFSF) for repayment. The institutions thus waived the requirement that early payments to the IMF may only be made in parallel with payments to European lenders.

Repaying the emergency loans will take decades

ESM Director Klaus Regling also referred to the savings for the Greek budget. Staikouras explained that the early repayment saves his country 230 million euros in interest. For example, Greece will not have to pay any interest on the EFSF loans until this year.

The sovereign debt crisis of 2010 was followed by two more large financing rounds, in which the IMF and European partners transferred billions to Athens. Overall, the emergency loans and aid from the three aid programs between 2010 and 2018 add up to around 278 billion euros. ESM and EFSF loans will still take decades to be repaid.

In return for the aid, Greece had to implement strict austerity measures that have exacerbated unemployment and poverty in the country, at least temporarily. Greek spending will be under special scrutiny until the end of the year.

Concern about sustainability in the event of rising interest rates

The positive signal should not obscure the fact that Greece’s budget situation is still above average. On the one hand, spending in the wake of the Corona crisis alone has dramatically increased debt levels in Europe. At the beginning of the year, there was growing concern on the financial markets that the imminent turnaround in interest rates in Europe would particularly affect the countries in southern Europe.

Despite the haircut in 2012 and recent progress, Greece still has the highest public debt in the eurozone. At the end of 2021, the IMF estimated the debt level at a good 366 billion euros. According to government forecasts, debt is expected to be 189.6 percent of gross domestic product by the end of this year – up from 197.1 percent last year and 206.3 percent in 2020.