Greece to ask for lock over debt service cost

Greece will ask its international lenders this week to lock annual debt-servicing costs on its official loans at a fixed interest rate to make its debt mountain more manageable.

At the spring meetings of the IMF in Washington starting tomorrow, Athens will also suggest a proposed 15% of GDP annual cap on debt servicing costs is divided, with 8% for bond and loan repayments and interest, the biggest cost, and 7% for paying down outstanding treasury bills.

It is seeking to fix its presently fluctuating rate on its EU bailout loans to have a buffer against possible higher rates if the ECB starts raising them again, sources said.

“In that way they will lock their annual debt-servicing cost for the coming years, and will give the investors a clear picture about how much Greece will have to spend each year,” one source said.

“It will work as a guarantee that Greece will be able to service its debt without any upsets,” the source said.

With a mountain of debt projected to reach 174.4% of national output, or €337.6bn this year, debt relief has been the rallying cry of Greece’s left-led government.

Greece has received three international bailouts since 2010. Debt repayment projections do not include the last bailout worth up to €86bn it signed up to in August.

Athens has a measure of sympathy from the IMF to its call; a draft IMF memorandum urged Greece’s European partners to grant Athens substantial relief on its debt, which it sees remaining “highly unsustainable”. However, German finance minister Wolfgang Schaeuble has said he sees no need for debt restructuring at present. n Reuters


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