Greece does not have to meet a mandatory repayment obligation to EU to make a partial early repayment of a loan from the International Monetary Fund, the European Stability Mechanism, or ESM, said in a statement on Monday.
“The Boards of Directors of the European Stability Mechanism (ESM) and European Financial Stability Facility (EFSF) agreed today to waive the mandatory repayment obligation of ESM/EFSF loans in connection with a partial early repayment by Greece to the International Monetary Fund (IMF),” the ESM said.
In September, Greece revealed that it intends to repay early nearly EUR 2.7 billion of its outstanding loans to the IMF.
The country had agreed with the ESM and the EFSF while securing bailouts during crisis times that in the event of an early repayment to the IMF, a proportional amount of the financial assistance should be repaid to both EU facilities. Without the waiver approved on Monday, Greece would have been obliged to make a cumulative repayment of EUR 52.2 billion to the ESM and EFSF in parallel to its IMF repayment, the ESM said.
“It will generate savings as Greece can now finance itself on the market at a lower cost compared to the cost of servicing the tranche to be repaid to the IMF,” ESM Managing Director and EFSF CEO Klaus Regling said. “This will improve Greece’s debt sustainability and should be positively perceived by financial markets.”
These benefits can materialize only if the ESM and EFSF waive their early repayment rights, and these will improve the EFSF’s and ESM’s position as Greece’s main creditors, Regling added.
The material has been provided by InstaForex Company – www.instaforex.com