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Greek debt scenarios: “Great stretch” or “time to default”?

Hardly has Greece managed to return to the international markets and several scenarios started to circulate again about the future of the Greek debt. One of the scenarios claims that the solution would be is a great stretch of another 20 years for the pay back of the bailout loans. International Monetary Fund seems to be convinced that Greece would need more funding for the next two years. And at the same time, voices are raised again that now it’s high time to Greece to default. Certain is that a new PSI is not an option.

 “Great Stretch” to secure Greek debt return

“Now European partners are preparing to ease Athens’ debt burden without writing off their loans but by stretching them out into the distant future, extending maturities from 30 to 50 years and further cutting some interest rates, EU officials say.

Greece made a successful, if artificially engineered, return to the long-term capital markets last week for the first time since its international bailout in 2010, and just two years after imposing heavy losses on its private creditors.

But with its economy shattered, the country is still a long way from being able to fund itself unassisted in the market. The International Monetary Fund says Greece is likely to need further financial help from the euro zone over the next two years.” (full article Reuters)

International Monetary Fund’s Poul Thomsen told private Mega TV that the Greek debt was still exceptionally high.

The International Monetary Fund’s Poul Thomsen said on Sunday that Greece’s public debt was still «exceptionally» high at 175 percent of output and that the country’s ongoing bailout would need «more financing.”

“In our view, (the bailout) is not fully financed the whole way to 2016 and one would need…to find some more money,» Poul Thomsen, the IMF mission chief on the Greek bailout, told Mega channel. (full article ekathimerini)

At the same time, default scenarios are making the rounds again.

Top economists warn Germany that EMU crisis as dangerous as ever

Benn Steil, from the Council on Foreign Relations:

Mr Steil warned that the achievement of primary budget surpluses in Italy and Greece may prove a Pyrrhic Victory since history shows that heavily-indebted countries are most likely to default once they have crossed this line and can meet day-to-day costs from tax revenue. “This is a good time for Greece to default,” he said (telegraph)

” For the first time since the crisis Greece is in a position to default,” writes the Financial Times on Monday. “It not in recession nor is it recovering. It has collapsed. But there is another story.”

It’s the moment for Greece to default

“While such a scenario would freak out foreign investors when it happened, they could be relied upon to forget it quickly, and come back quickly. After all, the probability of a default is lowest right after you have defaulted. At that point, a reformed Greece should be very attractive to foreign investors, not just financial investors.

I am not advocating exit. Greek voters and foreign investors should however know that Greece is now in a position where there is a choice, ” concludes German journalist Wolfgang Munchau. (full article Financial Times)

What’s the point of a euro exit & default scenario right now? Would Greek PM Samaras dare such a  step now that he can claim primary surplus and return to the markets? Certainly not.  Would main opposition left-wing SYRIZA do it should it win the next elections and while there are voices inside the party supporting this idea? Certainly not either. Because SYRIZA would definitely need a coalition partner to form a government.

So what’s the point of such scenarios and a new German attempt to influence voters and bring up “Greek default” on the agenda?

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