Greek Prime Minister Kyriakos Mitsotakis has made a bold commitment to repay two years' worth of bailout loans ahead of schedule, signaling his government's confidence and commitment to attract investment and strengthen Greece's economy. Mitsotakis, who recently won a resounding majority for a second term in office, aims to implement investor-friendly policies and reduce Greece's staggering debt of €356 billion ($388 billion), which is the highest in the euro area relative to output.
During an interview with Bloomberg Television, Mitsotakis expressed his determination to regain Greece's investment-grade sovereign credit rating, which was lost 13 years ago during the country's severe financial crisis. The prime minister emphasized his focus on making Greece an attractive destination for foreign investment and ensuring a rapid decline in the debt-to-GDP ratio.
Repaying the Greek Loan Facility ahead of time will hold significant symbolism for Mitsotakis as he seeks to put behind the years of financial turmoil that nearly led to Greece's exit from the European currency union. His electoral victory was seen as a positive credit event for the country by rating agencies such as Moody's and Scope Ratings. As a result, investors have shown increased interest in Greek bonds, making them the best performers in the developed world this year. This surge in demand has lowered Greece's borrowing costs, allowing the nation to pay lower interest rates on its debt compared to Italy, even though Italy is considered safer by rating firms.
Despite the positive market response, Mitsotakis emphasized the need for official approval from rating agencies to regain Greece's investment-grade status. However, Greece's 10-year bond yield has already dropped significantly to 3.7% this year, while the yield spread between Greek and Italian benchmark bonds has reached a record low.
Mitsotakis assured that the Greek government will continue its efforts to strengthen the economy and address the current account deficit, which increased to 9.6% of GDP in 2022 due to the energy-price shock.
It is worth noting that Greece has already repaid all the loans provided by the International Monetary Fund ahead of schedule and has started early repayments of bilateral Greek Loan Facility loans provided by European countries. This facility was part of the initial financial support program for Greece agreed upon in May 2010.
Mitsotakis' successful re-election and his commitment to economic growth have positioned him as an influential leader in Greek politics. His New Democracy party secured 41% of the vote, giving them 158 out of 300 seats in parliament. With this re-election, Mitsotakis becomes the only New Democracy leader to increase the party's vote share after a first term and achieves the largest winning margin since 1974.