Greece has managed to repay €2.5 billion to the European Financial Stability Facility (EFSF) from the proceeds of the reprivatisation of its banks. Typically, these financial institutions had been provided with critical recapitalisation support from the Hellenic Financial Stability Fund (HFSF).

Greece on September 1st officially wrote to the EFSF and the European Stability Mechanism (ESM) that its Hellenic Corporation of Assets and Participations (HCAP) has some €4 billion in proceeds from the HFSF after the merger.

The EFSF and ESM also have contractual rights to be paid back on the proceeds of the HCAP generated through financial assistance provided to banks under the previous financial assistance programmes. As a result, the EFSF used up its rights for a total of €2.5 billion of these resources. This particular allocation was made as EFSF loans have a higher borrowing cost than do ESM loans. The balance of proceeds remain in the possession of the two European institutions who both have rights to them.

Pierre Gramegna, EFSF’s Chief Executive, said this is a good example of how far the country has come in the process of rebuilding its financial system and economy. By using the proceeds of bank reprivatizations to pay down public debt, he said he was sending a tangible message of the recovery of the Greek banking sector since the economic crisis, and of confidence on the markets.