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Crux of the matter for Greece: EUR 315 bn of debt

27 January 2015, 14:10 CET
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(BERLIN) - Greece's debt mountain is the biggest issue for the new government being set up in Athens and will be at the centre of negotiations between Prime Minister Alexis Tsipras and the country's EU partners and main creditors.

Q: How much does Greece owe in total?

A: More than 315 billion euros. The exact figure varies according to the different sources: the EU's statistics authority Eurostat puts it at 315.5 billion euros at the end of September 2014, while the European Financial Stability Facility (EFSF) estimates it at 324 billion euros.

Depending on which figure you take, the debt represents between 175 percent and 177 percent of Greek gross domestic product (GDP), the highest ever amount in the European Union.

The issue is whether such a huge amount of debt is "sustainable", ie. whether Greece can afford the cost of servicing it. The massive interest payments eat up a large part of the country's financial resources, leaving it very little to invest in economic growth and job creation.

The debt is therefore the crucial issue for Greece.

Q: Who holds Greek debt? When must it be paid back?

A: The EFSF is the biggest creditor to Greece, holding more than 40 percent of the total debt. Set up in 2010 to come to the rescue of ailing eurozone countries, the EFSF has loaned a total 141.8 billion euros to Greece in a number of different tranches. The average maturity of the debt is 30 years.

The EFSF raised the funds via the markets, but eurozone countries guaranteed equivalent amounts, each proportional to their economic weight in the single currency bloc. Germany guaranteed more than 40 billion euros and France 31 billion euros.

In addition to the guarantees, Greece's eurozone partners also paid out a total 52.9 billion euros in bilateral loans as part of an initial bailout programme. Here, too, the share was proportional to the countries' economic weightings.

The European Central Bank (ECB) started buying up Greek bonds on the financial markets in 2010 and currently holds around 25 billion euros in Greek debt, a central bank spokesman said.

The International Monetary Fund (IMF), which participated in the different rescue packages, holds around the same amount.

The remainder of the debt is held by investors -- mainly banks -- in the form of bonds, with an average maturity of just over eight years.

A country's total exposure to Greece's debt includes the bonds held by its banks, its bilateral loans and its capital shares in the IMF, etc. ECB executive board member, Benoit Coeure, estimated on Monday that France's total exposure, for example, is 40 billion euros.

Q: What has been offered to Greece so far in terms of debt relief?

A: At the start of 2012, Greece restructured its debt in a deal involving so-called Private Sector Involvement or PSI, where private creditors took "haircuts" or wrote down parts of their holdings. This cut Greece's total debt burden by around 100 billion euros.

At the same time, public creditors agreed to relief measures, too, such as lower interest rates and longer maturities. But wiping out public debt remains taboo.

Q: What are the possible scenarios?

A: A simple or straightforward debt write-off, or partial write-off, has been ruled out by European leaders. But "there will be no getting round a re-negotiation" of the debt, a European source told AFP. As in 2012, it could take the form of a renewed reduction in interest rates and/or extended maturities. Even if this only applied to the EFSF and bilateral loans, this would represent substantial debt relief for Greece, as it represents more than 60 percent of its total debt.


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