Greek debt relief talks to focus on net present value, central banker says
By Lefteris Papadimas and Jan Strupczewski
ATHENS (Reuters) - Future talks on debt relief for Greece will focus on the debt's net present value, Greek deputy central bank governor Ioannis Mourmouras told a business conference on Tuesday, endorsing the approach favoured by euro zone governments.
Euro zone creditors believe that forgiving Greece part of its debt -- a "nominal haircut" -- is not necessary, because thanks to very low interest, long maturities and grace periods, the net present value of the debt is manageable.
"I estimate that the basis of the discussion will be the net present value of the debt," Mourmouras told an annual conference of the American-Hellenic Chamber of Commerce.
Even though Greece's debt-to-GDP ratio is above 180 percent, grace periods mean Athens does not have to service the loans for the next eight years.
The average maturity of the loans is already 32 years and the interest is less than 1 percent. Consequently, the burden of the debt on the Greek economy now, or what economists call net present value, is small.
More maturity and grace period extensions, planned as part of the debt relief talks, will further spread out any repayment humps and the burden to the economy.
"If you add up all favourable terms made in the European official lending, the benefit is equivalent to a 50 percent haircut from a Greek perspective," the head of the euro zone bailout fund, Klaus Regling, told the European Parliament in November.
The debt relief talks however, can only start once Greece implements an agreed set of reforms, which include politically difficult changes to the pension system, income tax, electricity markets and the setting up of an independent tax office.
Greek Economy Minister George Stathakis told the conference that Greece would still close the first review in December.
The head of the European Commission's mission to Greece, Declan Costello, was less optimistic, telling the same conference on Monday euro zone creditors hoped to have the review done in early 2016.
Closing the review would also make Greece eligible for the European Central Bank's government bond-buying programme, creating more demand for Greek debt on the secondary market and easing the eventual return of Athens to capital markets.
Mourmouras, however, said the initial amounts of Greek bonds that the ECB could buy on the market would be small, around 3 billion euros (£2.1 billion).
(Reporting By Jan Strupczewski and Lefteris Papadimas; Editing by Alastair Macdonald, Larry King)
