Greek Finance Minister Christos Staikouras has announced that Greece will submit an official request to the Eurogroup seeking permission to repay a loan to the International Monetary Fund, a move that would follow similar steps taken by fellow EU members Ireland and Portugal.
Ireland repaid a remaining €4.5 billion owed to the IMF in 2017, a day after it paid back €1 billion in bilateral loans from Sweden and Denmark. The final maturities on the IMF loan would normally be due on December 2023.
The combined savings for Ireland by servicing all the loans early is expected to be €150 million.
Portugal paid €4.7 billion from its bailout loan that owed to the IMF in December 2018. The final maturities on the IMF loan were due in 2024 and the Portuguese government is estimated to have saved a cumulative €1.16 billion in interest payments.
Greece’s new conservative prime minister, Kyriakos Mitsotakis, told the press on 8 September that the relevant request will be submitted by no later than the end of the coming week, which would put the country on course for a comeback to investment-grade bonds.
The Greek government has announced a series of tax cuts while, officially, it is expected to ensure a budget surplus to the tune of 3.5% of GDP in 2019 and 2020. The challenge now at hand is to square a significant surplus with tax cuts.
Corporate taxes will now be reduced from 28% to 24% and Mitsotakis also wants to see a significant reduction in income tax for the first €10,000 and to scrap the country’s crippling high Value Added Tax for new building construction.
The incoming President of the European Central Bank, former IMF chief Christine Lagarde, told the European Parliament that she favours reducing that target to a maximum of 2%. If the Greek debt to the IMF is repaid, the EU institutions will be entitled to make that call.
The Greek economy is expected to grow by 2.2% in 2019, far ahead of the most projections which have pointed to a major economic slowdown throughout Europe.