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Debate Over Greek Debt ‘Relief’ Begins With the Definition
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Jack Ewing of the NYT provides this exceptional account of how a solution can emerge in the Greece crisis based on debt sustainability relief. On this issue of debt sustainabilty relief without immediate haircuts but stretching the payments over an extended period with still lower rates, there is a consenus emerging with the IMF and France, putting forward the idea, and Germany showing awillingness to consider this. It would also restore some unity in the European Union with France and Germany moving in the same direction with a common goal.
The solution shift to debt sustainability for Greece, a point on which Germany, France and the IMF agree
07/10/2015
Merkel and Schauble of Germany have opposed debt haircuts for Greece in July 2015, but have left open the possibility of debt sustainability by stretching the debt over a longer period with even lower interest rates. This is the position now adopted by the IMF and France. This is also the way past debt crises have been resolved in Latin America, with haircuts emerging at a later stage when a consensus can be obtained on the issue. About 2.5% of GNP goes to paying the interest on debt and principal payment. These payments are higher in the next 5 years, and with the mismanagement of the economy under the Syriza left government this is likely to be unsustainable. Stretching the payments over an extended period will provide Greece more room to grow. Greece will still need to maintain financial discipline with expenditures lower than revenues in coming years, regardless of which party runs the government.
Grouped Articles
Debate Over Greek Debt ‘Relief’ Begins With the Definition
New York Times 07/10/2015
IMF Warns Eurozone That Greece Needs Far More Debt Relief
Wall Street Journal 07/15/2015
Alexis Tsipras, Greek Prime Minister, Sheds His Identity as a Radical
New York Times 07/21/2015
Personalities Clashing Over How to Handle New Greek Bailout
New York Times 07/23/2015
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