The plan for faster Greek debt reduction – High primary surpluses up to 2025

The Greek government’s economic team has established two key milestones in its debt reduction strategy.

The first goal aims for Greece to no longer be the most indebted country in Europe by 2029. The second milestone involves making early repayments by 2031 for the remaining €31.6 billion owed from the first memorandum. These repayments will occur in equal quarterly installments from 2029 to 2041. A significant step in this timeline includes a €5.29 billion payment due in December 2025, which is part of the total obligations from the first memorandum.

The Ministry of Economy and Finance and the Public Debt Management Agency aim to project credibility to the markets, protect the Greek economy from potential international instability, and eliminate past burdens that could affect the next decade. This strategy will free up fiscal resources for growth and allow for the distribution of dividends to citizens, rather than servicing previous debts.

“By fully repaying the International Monetary Fund loans and addressing the first expensive memorandum, we are effectively mitigating the risks that will arise post-2032, when the country will face pressure from higher debt servicing costs,” stated Kyriakos Pierrakakis during his recent visit to ODIHR.

High Primary Surpluses are Essential

Central to this strategy are the significant primary surpluses achieved through strong economic growth and efforts to combat tax evasion in recent years.

The projected primary surplus for 2024 is set at an all-time high of 4.8% of GDP, equating to €11.4 billion, surpassing earlier budget forecasts. For 2025, both the government and the Bank of Greece have raised this year’s primary surplus estimate from 2.4% to 3.2% of GDP, with expectations for further upward revisions by year-end.

Significant Decline in Debt

With these projections, the total government debt is anticipated to continue declining sharply in 2025, targeting a reduction to below 145% of GDP, down from 153.6% in 2024. In 2023, general government debt was reported at 163.9% of GDP and at 177% in 2022, according to data from ELSTAT and Eurostat.

Thanks to the substantial primary surpluses, the country’s cash reserves have reached a record €44.1 billion, serving as a vital ‘safety cushion’ for expedited debt reduction planning.

The Greek government’s robust cash reserves also enable the ODHH to undertake strategic bond issuances for effective debt management.