Greek
debt relief talks to focus on net present value, central
banker says
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[December 01, 2015]
By Lefteris Papadimas and Jan Strupczewski
ATHENS (Reuters) - Future talks on debt
relief for Greece will focus on the debt's net present value, Greek
deputy central bank governor Ioannis Mourmouras told a business
conference on Tuesday, endorsing the approach favored by euro zone
governments.
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Euro zone creditors believe that forgiving Greece part of its debt
-- a "nominal haircut" -- is not necessary, because thanks to very
low interest, long maturities and grace periods, the net present
value of the debt is manageable.
"I estimate that the basis of the discussion will be the net present
value of the debt," Mourmouras told an annual conference of the
American-Hellenic Chamber of Commerce.
Even though Greece's debt-to-GDP ratio is above 180 percent, grace
periods mean Athens does not have to service the loans for the next
eight years.
The average maturity of the loans is already 32 years and the
interest is less than 1 percent. Consequently, the burden of the
debt on the Greek economy now, or what economists call net present
value, is small.
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More maturity and grace period extensions, planned as part of the
debt relief talks, will further spread out any repayment humps and
the burden to the economy.
"If you add up all favorable terms made in the European official
lending, the benefit is equivalent to a 50 percent haircut from a
Greek perspective," the head of the euro zone bailout fund, Klaus
Regling, told the European Parliament in November.
The debt relief talks however, can only start once Greece implements
an agreed set of reforms, which include politically difficult
changes to the pension system, income tax, electricity markets and
the setting up of an independent tax office.
Greek Economy Minister George Stathakis told the conference that
Greece would still close the first review in December.
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The head of the European Commission's mission to Greece, Declan
Costello, was less optimistic, telling the same conference on Monday
euro zone creditors hoped to have the review done in early 2016.
Closing the review would also make Greece eligible for the European
Central Bank's government bond-buying program, creating more demand
for Greek debt on the secondary market and easing the eventual
return of Athens to capital markets.
Mourmouras, however, said the initial amounts of Greek bonds that
the ECB could buy on the market would be small, around 3 billion
euros (£2.1 billion).
(Reporting By Jan Strupczewski and Lefteris Papadimas; Editing by
Alastair Macdonald, Larry King)
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