Greece is in an impossible situation. It’s clear that rejecting the demands of the IMF / “troika” might lead to instant catastrophe. But is it widely understood just how bad accepting those demands would be? An excellent piece in The Guardian:
IMF: austerity measures would still leave Greece with unsustainable debt
Secret documents show creditors’ baseline estimate puts debt at 118% of GDP in 2030, even if it signs up to all tax and spending reforms demanded by troika
Greece would face an unsustainable level of debt by 2030 even if it signs up to the full package of tax and spending reforms demanded of it, according to unpublished documents compiled by its three main creditors.
The documents, drawn up by the so-called troika of lenders, support Greece’s argument that it needs substantial debt relief for a lasting economic recovery. They show that, even after 15 years of sustained strong growth, the country would face a level of debt that the International Monetary Fund deems unsustainable.
The documents show that the IMF’s baseline estimate – the most likely outcome – is that Greece’s debt would still be 118% of GDP in 2030, even if it signs up to the package of tax and spending reforms demanded. That is well above the 110% the IMF regards as sustainable given Greece’s debt profile, a level set in 2012. The country’s debt level is currently 175% and likely to go higher because of its recent slide back into recession.
The documents admit that under the baseline scenario “significant concessions” are necessary to improve Greece’s chances of ridding itself permanently of its debt financing woes.
Even under the best case scenario, which includes growth of 4% a year for the next five years, Greece’s debt levels will drop to only 124%, by 2022. The best case also anticipates €15bn (£10bn) in proceeds from privatisations, five times the estimate in the most likely scenario.
But under all the scenarios, which all assume a third bailout programme, looked at by the troika – the European commission, the European Central Bank and the IMF – Greece has no chance of meeting the target of reducing its debt to “well below 110% of GDP by 2022” set by the Eurogroup of finance ministers in November 2012.
In the creditors own words: “It is clear that the policy slippages and uncertainties of the last months have made the achievement of the 2012 targets impossible under any scenario”. …
Apocalypse now or decades of servitude. Impossible dilemma. Greece needs a real rescue package of debt relief.
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