by Jurgen Balzan, MaltaToday
June 24, 2013 (TSR) – Malta will be paying 10.7 million over 30 in interest rates to service the loan granted to Greece in 2010, finance minister Edward Scicluna said.
Speaking in Parliament, Scicluna explained that Malta’s share in the Greek bailout amounted to 3% of its GDP, making Malta the largest contributor out of the EU member states.
Following a number of amendments to the 2010 agreement which granted Greece an €80 billion bailout through the ECB, the repayment period was extended from the original five years to 30.
Scicluna said that Malta had paid €50.6 million out of its €74.5 million commitment to the Greek bail out.
In his opening comments, the minister said that he would be giving an answer to a number of pertinent questions in regards to how much Malta was paying and whether Malta would be making a profit, as claimed by former finance minister Tonio Fenech in 2010.
“The situation is this, we are paying more interest over the money we borrowed to honour the bailout commitment than we will earn from the interests which Greece will pay us. We are paying €369,000 annually in interests, meaning that over 30 years we will pay €200 million which is equivalent to 3% of our GDP.”
Although this agreement does not impinge on the European Commission’s evaluation on Malta’s financial situation, Scicluna said that this still affects Malta’s credit rating.
“This is the highest rate in the EU27, with the European powerhouse paying 2.2% of its GDP. Its not a matter of being proud of our contribution but we must demand equal treatment,” Scicluna said.
The €80 billion bailout approved in May 2010 saw Malta lending Greece €50.6 million in a bilateral agreement. In May 2010, the Maltese Parliament ratified the EU bailout agreement which set a 3.7% interest in the first three years and 4% in the following years.
The original agreement was intended to span over five years with a three year grace period.
However, one year later, the situation in Greece deteriorated and amendments to agreement were needed, Scicluna said.
The agreement was amended and the interest rate was decreased to 2% in the first three years and 3% in the following years. The maturity period was also extended from five to 10 years and the grace period was extended by one year.
In 2012 the interest rate was reduced to 1.5% and the grace period was extended to 10 and the payment period to 15 years.
This year a third amendment to the agreement was reached by the EU and the interest rate went down to 0.5% and the repayment period extended to 30 years. These latest changes have not yet been ratified by the Maltese Parliament, however the agreement is expected to be ruberstamped in the coming weeks, with both parties in Parliament backing the agreement.