Greece to seek ESM consent for early repayment of IMF loans this week: source

FILE PHOTO: A Greek flag flutters atop the parliament building in Athens
FILE PHOTO: A Greek flag flutters atop the parliament building in Athens, Greece, June 21, 2018. REUTERS/Costas Baltas/ File Photo

April 15, 2019

ATHENS (Reuters) – Greece plans to file a request this week seeking the euro zone bailout fund’s consent to the early repayment of expensive loans owed to the International Monetary Fund, a source close to the process told Reuters Monday.

Greece wants to repay about 3.7 billion euros in IMF loans, the source said. The European Stability Mechanism would have to be repaid the same amount, under Greece’s bailout terms, but is likely to waive this right.

The IMF loans that Athens wants to repay expire in 2019 and 2020, a second source told Reuters.

“This means the IMF will remain as an observer in Greece’s post bailout surveillance program,” the second source said.

Klaus Regling, who chairs the ESM, said earlier this month that such a move would be wise as the loans are more expensive than the yields Athens currently pays in the markets on its bonds.

But a third official said last week that Germany and the Netherlands were resisting the move, worried the IMF would want to withdraw from the periodical reviews of Greek reforms by its lenders.

Greece, the euro zone’s most indebted state with a debt load equivalent to 180 percent of annual output, must repay a total of about 9.3 billion euros of loans to the IMF by 2024.

The Washington-based Fund also views the move positively, one of the sources said.

The country has signed up to three rescue programs worth 280 billion euros since 2010, when its debt crisis broke out. It emerged from its latest bailout in August last year and has successfully tapped bond markets twice since then.

IMF loans, issued to Greece as part of its first two bailouts, cost Athens around 5 percent annually and are now more expensive than financing in the market, where 10-year benchmark bonds trade at around 3.29 percent GR10YT=TWEB

Greek government bond yields were closing in on record lows on Monday after an official said a deal to repay International Monetary Fund loans is imminent.

(Reporting by Renee Maltezou and Lefteris Papadimas; Editing by Alison Williams and Peter Graff)

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