Prime Minister Alexis Tsipras wants a debt relief. The International Monetary Fund wants the same. Both consider Greece’s debt as unsustainable. But the country’s European partners, the country’s biggest lenders do not want to hear about such option. At least not now.
According to Eurogroup head Jeroen Dijsselbloem, Greece may face problems to serve its debt only after 15 years.
“The European Stability Mechanism’s analysis has shown that the first financing humps will maybe occur in 15 years. So, if that is the case, it would be strange to already try to tweak those – they are very far away,” Dijsselbloem told Reuters.
The Euro-zone governments, Greece’s biggest creditors, agree that “debt relief for Athens should be accomplished by capping its debt servicing costs at 15 percent of gross domestic annually,” Dijsselbloem added.
He also stressed in full optimism that “We will see if there are any financing peaks in the coming 30 years.”
Dijsselblome left a tiny door open though saying “But we will see – it very much depends on the scenarios we work on with the IMF.”
Dijsselboem unfolded the eurozone’s “debt sustainability” scenario in Lima, Peru when the IMF’s annual meeting is currently taking place.
On the other hand, the IMF believes Greece might need more generous terms, with annual costs limited to 10 percent of GDP. Christine Lagarde reiterated that the Greek debt is unsustainable. The IMF still considers whether to participate in the Greek program.
In his interview to Reuters, Dijsselbloem said that discussion on debt relief could start later this year, after Greece successfully passes the creditors’ ‘program review’.
Then Greece’s lenders from Brussels and Washington will start thinking about the method to be used for a possible debt relief. That is whether “relief should be granted up front, over time as some conditions are met, or as a mix of the two,” Disjsselbloem said.
“There is a broad understanding about the method we should choose, that is to look at the annual financing needs for the sovereign debt. What are the realistic expectations in a normal scenario? Or in an adverse scenario in terms of growth and inflation, etc?” he said.
Greece’s lenders are apparently not in a hurry to find out which method for what. They are not under pressure to find money to pay their rent and bills and feed their family. They have time.
At the very end, in 15 years Dijsselbloem (now 49), Lagarde (59), Schaeuble (73) will not hold their current positions, And in 30 years they, I , we all will certainly be 6 feet under.
Nothing is eternal but the Greek debt – sustainable or unsustainable.
15% of GDP as debt service must be misstatement! (last year it was 3%). That would be about half of tax revenues. Impossible!
5% of exports granted for Germany after WW2 for servicing the dept, 15% of GDP for Greece?
Percentage of exports is only applied when borrowing countries have a national currency and debt is in foreign currency. Put differently, creditors want to control that a portion of foreign currency receipts is applied to the servicing of foreign currency debt. Does not apply to Greece within the Eurozone.
The most meaningful percentage would be debt service as percentage of tax revenues. Debt is serviced out of tax revenues. Basically, one tells a country: we expect you to allocate x-% of your tax revenues to debt service. Indicentally, Greece’s percentage of tax revenues alloated to debt service is among the lowest, if not the lowest in the Eurozone. And that as by far the most indebted country in the Eurozone.
So why not have just no tax as no tax-revenues means no “debt”-service?
Debt that consists of 75% interest to call debt is also crazy as only capitalists can be
Every time Diesel-Bloomers speaks, I am reminded of what my father said many, many years ago:
Science has been able to measure the heights of man’s intelligence, but remains unable to plumb the depts of some people’s stupidity.
wise dad
Schäuble is dead already since 25 years when he met grim-justice. What gets shown in public is a new model of mutant. Remember back then news-speakers were only able to be seen from above their table and without legs.