Below duty as a percentage of GDP will have Hellas from Italy in 2026, losing the sector’s negative primary for the first time in 15 years, according to Stability programs for 2023-2026which two countries presented Commission last week. In particular, the Greek debt will then amount to 135.2% of GDP compared to 140.4% of the Italian, provided, of course, the implementation of the two programs, according to forecasts.

In particular, according to program forecasts, Greek debtAfter falling by 23.3 percentage points in 2022, when it reached 171.3% of GDP, it is projected to continue a sharp decline. This year, it is predicted to close at 162.6% of GDP, and then form at 150.8% of GDP in 2024, 142.6% of GDP in 2025 and 135.2% of GDP in 2026. Thus, the overall decrease by 36.1 percentage points. in the next four years. Compared to the all-time high due to COVID in 2020, when it stood at 206.3% of GDP, the 71.1 percentage point decline in Greek debt to 135.2% of GDP in 2026 is impressive.

By contrast, in Italy, the retreat envisaged by the country’s Stability Program has been slow. From 144.4% of GDP in 2022, 142.1% of GDP is projected this year, then 141.4% of GDP in 2024, 140.9% of GDP in 2025 and 140.4% of GDP in 2026. Thus, in four years as a whole, the decrease is only 4 percentage points compared to the 36.1 points of the Greek debt decline.

The forecast for a rapid deleveraging of Greek debt, according to economic analysts, is largely based on a strong growth forecast: 2.3% this year, accelerating to 3% in 2024 and 2025, and 2.1% in 2026. the contribution of the Recovery Fund also plays an important role. In Italy, GDP growth is projected at 0.9% this year, followed by 1.4% in 2024, 1.3% in 2025 and 1.1% in 2026.

The forecast for a rapid decline is based on estimates of strong growth and primary surpluses above 2% in the coming years.

Fiscal adjustment is also playing a role in deleveraging as Greece is projected to record a primary surplus of 1.1% of GDP this year, followed by 2.1% of GDP in 2024, 2.3% of GDP in 2025 and 2.5% of GDP in 2026. (excluding the measures announced by the Prime Minister, which, if implemented, will limit the primary surplus in the next years to around 2% of GDP, which may also slightly slow down the debt reduction). In Italy fiscal adjustment is more complex, the primary result is projected to be negative again this year, with a return to a surplus of just 0.3% of GDP in 2024 and then upward trend to 2% in 2026.

In addition, according to analysts, the structure of the Greek debt, as it developed after its regulation creditors, the average duration of which is currently 18 years. Greece pays low debt service costs as loan needs are low, while Italy, on the contrary, is forced to borrow large sums in the markets for its maintenance and is therefore burdened with constant rise in interest rates. Moreover, as pointed out, even today, for this reason, the markets lend to Greece at a lower interest rate than to Italy, even though the latter is in investment grade.

Window of opportunity

Analysts note, however, that this advantage will not last forever, as from 2032 Greece will be required to pay frozen interest on its original loans from the EU. should take advantage of this window of opportunity until 2032 to reduce its debt so as not to overburden itself when it has to service it by borrowing from the markets.

High inflation has, of course, also played a role in debt relief so far. According to analysts, the decline from 206.3% of GDP in 2020 to 171.3% of GDP in 2022 is 2/3 due to real growth and 1/3 due to inflation. However, inflation is expected to decrease in the coming years.