The sustainability of the Public Debt is guaranteed at least until 2030, the Bank of Greece estimates.

The evolution of public debt and gross financing needs in various adverse scenarios shows limited deviations from the basic scenario of the Bank of Greece until the beginning of 2030, as stated in its annual Report.

Consequently, the BoE estimates that the possibility of reversing the downward course of the debt-to-GDP ratio is limited in the medium term, as is the possibility of exceeding the 15% and 20% of GDP limits for gross financing needs. Based on the above, the risks to the sustainability of the public debt are estimated to remain limited in the medium term, provided the adherence to the achievement of the fiscal goals and the effective utilization of European resources.

According to the estimates of the Bank of Greece, the general government debt is expected to reach 161.9% of GDP in 2023 and 153% of GDP in 2024. In the base scenario, subject to adherence to the fiscal targets and of the effective utilization of European resources, the debt-to-GDP ratio is set on a steady downward trajectory, which is temporarily halted only in 2033 for purely technical reasons.

In particular, the year 2033 marks the end of the initially 10-year and then 20-year period of deferral of interest payments on loans of approximately €96 billion granted by the EFSF between 2012 and 2014.

Based on the assumptions of the baseline scenario, the accumulated deferred interest that will be added to the public debt in 2033 amounts to about 27 billion euros or 8% of the GDP of the same year. However, according to the European Commission, the possibility is being considered that the deferred interest may be spread over the years to which they refer.

This would lead to a retroactive increase in the debt of the past years from 2013 onwards, avoiding the one-time burden of the year 2033 with the total amount. In any case, as the European Commission notes, the statistical treatment of deferred interest does not affect the sustainability of public debt.

In any case, as underlined in the Report, “the evolution of debt ratios and gross financing needs to GDP shows limited differences between the scenarios under consideration until the beginning of 2030, which demonstrates the increased resilience of public debt to a series of negative risks in the medium term .”

However, in the long term, increased uncertainty is estimated, as the gradual refinancing of debt obligations to the official sector on market terms will increase the exposure of the Greek State to interest rate risk, which eliminates the scope for fiscal easing. In the medium term, it is estimated that the possibility of reversing the downward trend of the debt-to-GDP ratio is limited, as is the possibility of exceeding the limits of 15% and 20% of GDP for gross financing needs.

Based on the above, as stated in the Annual Report of the Bank of Greece, “the risks to the sustainability of the public debt are estimated to remain limited in the medium term, under the condition of commitment to the achievement of fiscal goals and the effective utilization of European resources. This is largely due to the favorable terms of repayment of liabilities to the official sector, which constitute the largest part of the total debt, combined with the timely conclusion of interest rate swaps, which have “locked in” the historically low interest rates of the previous years.”