The European Financial Stability Facility (EFSF) on Tuesday announced that its board of directors approved a reduction, to zero, of a step-up margin accrued by Greece for the period between Jan. 1, 2022 and June 17, 2022, as part of medium-term debt relief measures agreed to in 2018.
The value of the seventh successive reduction is valued at 103.3 million euros and will be reimbursed to Greek coffers by the EFSF.
Additionally, as part of the same package of measures, on July 15, 2022, the European Stability Mechanism (ESM), acting as an agent of euro area member-states and with their stated approval, completed the transfer of 644.42 million euros to the Greek state.
The amount corresponds to income earned on holdings related to the Securities Markets Program (SMP) and the Agreement on Net Financial Assets (ANFA).
In an announcement, ESM Managing Director and EFSF CEO Klaus Regling, an “old-hand” of three successive Greek bailouts over the past decade, noted that “…Greece has made continued progress with reform implementation in the challenging circumstances of the pandemic crisis and the economic fallout of the war in Ukraine. The government carried out reforms concerning public financial management, property taxation, the justice system, and the Hellenic Financial Stability Fund. The European institutions delivered a positive assessment regarding the completion of Greece’s reform commitments in the first half of 2022. This cleared the way for this tranche of debt relief measures tied to those commitments…Greece’s reform progress, and the approaching end of the enhanced surveillance framework are signs of the country’s economic recovery and normalisation. Further efforts should continue, particularly regarding financial sector policies, the clearance of arrears, primary health care, the land register, and labour legislation.”
The step-up margin of 2 percent relates to the 11.3-billion-euro EFSF loan for Greece – part of the second Greek bailout program – which was used to fund a debt buy-back in 2012.
The margin had originally been foreseen to apply to this loan from 2017 onwards. Under the short-term debt-relief measures, the step-up interest margin was reduced to zero for the year 2017. As part of the subsequent medium-term debt relief measures for Greece, the EFSF Board of Directors agreed to a conditional mechanism to reduce the step-up margin to zero, starting with the year 2018. Such a reduction is possible by Board decision every six months until 1 January 2023, based on a positive assessment of Greece’s continued implementation of key reforms under the ESM program, and compliance with its post-program policy commitments.
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