Now, the interest burden of Greek public debt is low until 2021 but increases substantially thereafter because of payments of deferred interest on the EFSF loans and interest on new debt issued in financial markets. An exercise done at the Bank looks at the impact of smoothing interest payments for EFSF loans over time.
The results of these simulations suggest that, extending the Weighted Average Maturity of interest payments for EFSF loans by 8.5 years, while simultaneously allowing primary surpluses to decline to 2% of GDP after 2020, debt sustainability is safeguarded. This exercise is indicative of how admittedly mild debt relief measures can have significant effects on the debt profile with no cost for the creditors.