Greece’s Debt Structure is Holding It Hostage

Greece has taken out loans under English law worth 216 billion euros and these must be repaid and replaced with government bonds over a period of approximately 44 years, that is, they will be financed by the markets, banks and international investment funds. Due to this reality, the Greek debt cannot be reduced in substance and a reasonable debt would be 200 billion and not 400 billion, but due to an unfavorable reality, Greece will remain hostage. Greek debt at 400 billion euros First of all, it should be noted that recently the Greek Central Government Public Debt has remained stagnant in the 400 billion euros zone. Under the New Democracy government, the debt from 353 billion in 2019 jumped to 400.5 billion in 2026 with a high of 406 billion euros in the interim…

The Greek public debt

• General Government Debt 2026 at 357 billion euros
• General Government Debt 2010 at 356 billion euros

• Central Administration Debt 2017 at 325 billion euros
• Central Administration Debt 2019 at 353 billion euros
• Central Administration Debt 2026 at 400.5 billion euros

Increase in the New Democracy government… 47.5 billion euros

Why is the Greek Debt of 400.5 billion not decreasing?

To answer this question, we should look at the structure of the debt and the amount of cash reserves of Greece. Cash reserves amount to 38 billion, of which 24.5 billion concern a capital cushion for the debt to the ESM and the EFSF, i.e. the institutions that were created to finance troubled countries like Greece during the time of the Economic Support Programs (Memorandums). So the net treasury of the Greek state is 13.5 billion euros. However, the total Cash Reserves of the General Government reach 45 billion with an expansionary interpretation, so the net fund (minus the 24.5 billion for debt) is 20.5 billion euros… however, as we will see, this high fund is linked to repos and intra-governmental borrowing. Let us emphasize that Greece today, after repayments, owes the European Support Mechanisms approximately 216 billion euros and the 24.5 billion capital cushion exists to protect the 216 billion euros and not the total debt in essence. We therefore observe that Greece cannot reduce its public debt, which reaches 400 billion. The problem has to do with two factors 1) On the one hand, Greece repays loans to the European Support Mechanisms, a few years ago it was 264 billion euros and today it is 216 billion euros. 2) In order to maintain the government mechanism, Greece keeps its intergovernmental borrowing or repos or short-term borrowing high at 59 billion euros. Since the obligation to make payments to the European Support Mechanisms has existed, and on the other hand, Greece maintains extremely high intergovernmental borrowing or repos. The 59 billion repos essentially maintain the country’s state system, without them Greece would be a dead economy in a sense… So this explains why the Greek State Debt remains stuck at 400 billion and will not come off as long as we owe the European Support Mechanisms. At the same time, Greece borrows from the markets through bonds and interest payments. In general, it has borrowed 108 billion euros to cover the broader needs of the state and together with the repos, a hostage situation is created. So if we want to explain why the Greek Debt is stuck at 400.5 billion, the answer is simple: the hostage situation in the European Support Mechanisms and the hostage situation in the repos have trapped Greece. An unprecedented restructuring is taking place: as loans from the European Support Mechanisms decrease, these 216 billion, borrowing from the markets will increase, the 108 billion today. This picture will not change until 2035… so for many more years Greece will have stagnant debt.