Greece is moving decisively to accelerate the repayment of its public debt, a strategy that bolsters confidence among markets and creditors but reduces fiscal flexibility at home.

Government officials say Greece plans another substantial early repayment in 2026, one larger than last year’s, a move that will reduce the state’s cash reserves to about €30 billion by the end of the year. Those reserves, built up during the bailout years as a financial safety net, currently stand near €45 billion, after peaking at around €40 billion at the end of 2025.

The decision follows Greece’s first bond issuance of 2026, which was met with overwhelming investor demand. The state raised €4 billion, covering roughly half of its borrowing needs for the year, while bids reached an impressive €49.5 billion. A second bond sale is expected in the second quarter, likely in April, which would complete the year’s financing plan.

Larger repayments, lower interest costs

Alongside market borrowing, the government is preparing another early repayment of bilateral loans, potentially reaching €7 billion. That would exceed the nearly €5.3 billion repaid ahead of schedule last year.

Officials say the goal is straightforward: further improve the structure of public debt and lock in savings as interest rates normalize across Europe. If the repayment is executed earlier than planned, possibly well before year’s end, the state could save an estimated €90 million to €100 million in interest payments.

At the center of the strategy is the remaining €31.6 billion from the first bailout program agreed during the height of the crisis. Under the original timetable, these loans were to be repaid in quarterly installments between 2029 and 2041. Greece now aims to repay them in full by 2031.

Debt back to pre-crisis levels

The pace of repayment is reshaping the debt picture. According to the 2026 budget, Greece’s public debt is expected to fall by 7.7% of GDP to 138.2%, down from 145.9% in 2025.

In nominal terms, general government debt is projected to decline by €3.5 billion, to €359.3 billion, from an estimated €362.8 billion at the end of 2025.

This would place Greece’s debt ratio at roughly the same level as before the country entered the bailout programs. In 2010, when Greece received its first international rescue package, public debt stood at 147.8% of GDP.

The symbolism matters. For a country whose economy was reshaped by austerity, restructurings and years of restricted market access, returning to pre-crisis territory marks a turning point.

The road to 2029 and beyond

The next major benchmark is a drop below 100% of GDP, now projected for 2033 or 2034. Even under conservative assumptions, debt sustainability analyses remain favorable, including scenarios where long-term growth slows to between 0.4% and 0.8%.

Greece also expects to shed its position as the eurozone’s most indebted country. Based on the latest International Monetary Fund projections, the country is forecast to fall to second place by 2029, behind Italy.

The government has set a clear political target as well: reducing public debt below 120% of GDP, specifically to 119%, by the end of that same year.

A strategy years in the making

The planned repayment is part of a longer, deliberate strategy rather than a sudden shift. Greece has repeatedly chosen early repayments to eliminate higher-cost debt and improve credibility with investors.

These include a €2.7 billion repayment to the IMF in March 2019, €2.65 billion in March 2021, and a series of repayments in 2023 that culminated in the full early settlement of IMF loans totaling €1.86 billion. They were followed by a €5.29 billion early repayment of bilateral loans in December 2023 and a triple installment worth €7.93 billion in December 2024.

To date, Greece has fully repaid its IMF obligations and has already paid back €21.3 billion of the original €52.9 billion in bilateral loans. The remaining €31.6 billion had been scheduled for gradual repayment from 2029 through 2041.

Taken together, early repayments have allowed Greece to accelerate the settlement of €29 billion in loans and eliminate €3.5 billion in interest costs so far. The state budget is also expected to be relieved of €1.6 billion in interest payments that would otherwise have begun this year and continued for years to come.

Source: ot.gr