(Bloomberg) -- Greece aims to cut about 20 percentage points from its debt pile within just four years in another milestone in the escape from its decade-long crisis, the country’s finance minister said.
In an interview, Kostis Hatzidakis predicted that government borrowings will shrink to “close to 130%” of gross domestic product by the end of 2028, bolstered by an economy that has been outperforming its peers.
“This is a really significant reduction,” the minister said, speaking in his office in central Athens.
Greece’s debt ratio peaked at 207% in 2020 and is already projected by the government to shrink to 152.7% this year. A reduction of the quantum foreseen by Hatzidakis raises the imminent prospect of a smaller pile of borrowings than Italy unless that country’s public-finance trajectory changes drastically.
Along with shaking off junk status last year, the prospect of Greece no longer standing out as the region’s most indebted sovereign would amount to a remarkable turnaround for a country that was once a virtually bankrupt pariah within the euro zone, and almost left the single currency.
The new projections will be included in a fiscal plan that will be submitted to Brussels in early October.
What’s helping Greece at present is an economy that is outperforming most of its European peers. It grew 1.1% in the second quarter, at a time when the euro region as a whole eked out expansion of just 0.2%.
Hatzidakis now reckons that the country’s budget’s primary surplus — the measure of revenue minus spending, excluding interest payments — will be at 2.4% of GDP this year instead of an initial estimate for 2.1%. That gives the government scope to increase outlays.
“Thanks to a better-than-expected budget performance, we can have a higher increase in spending compare to the initial estimations,’ Hatzidakis said.
Greece will be able to grow its net expenditures by “a little higher than 3%” in 2025 — up from an initial forecast of 3% — while it will be able to keep increasing at an average of that latter amount until the end of 2028, the minister observed.
The government is also moving ahead with the early repayment of bailout credit worth a total of €8 billion ($8.9 billion), covering loan amortizations from 2026 to 2028. This will be the third time that it has accelerated reimbursement of aid received in its first rescue program in 2010, known as the Greek Loan Facility.
All these decisions underline the strength of the economy and the government’s determination to continue with a path of fiscal prudence, Hatzidakis said.
“This message is fully understood by the rating agencies, various international organizations and the investors abroad,” he added.
The government is also about to conclude a rapid privatization drive in the banking sector that started almost a year ago with the state’s full exit from Eurobank Ergasias Services and Holdings SA, Alpha Bank and Piraeus Bank.
In early October the Hellenic Financial Stability Fund — a bank recapitalization tool established at the start of Greece’s bailout programs — plans to proceed with a further disposal of a stake in National Bank of Greece SA.
“An additional sale of shares from those held by the HFSF is likely to happen in October — provided of course that the market conditions are favorable,” Hatzidakis said, without revealing further details on the exact timing or the size of such an offering.
In order for National Bank not to have any competitive disadvantage in relation to the country’s other three main banks, “it is the government’s intention to have the special rights the state has on the lender abolished,” the minister added.
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