“Greek debt nightmare laid bare,” headlines the Financial Times, following the leak of a “strictly confidential” report prepared and distributed last week to eurozone leaders by troika (EU/ECB/IMF) analysts. The 10-page “debt sustainability analysis”, obtained by the Financial Times, found that –
… even under the most optimistic scenario, the austerity measures being imposed on Athens risk a recession so deep that Greece will not be able to climb out of the debt hole over the course of a new three-year, €170bn bailout [€136bn in addition to the €34bn left over from Greece’s first €110bn bailout].
The report also warns that that two of the new bailout’s main principles might be self-defeating –
Forcing austerity on Greece could cause debt levels to rise by severely weakening the economy while its €200bn debt restructuring could prevent Greece from ever returning to the financial markets by scaring off future private investors.
The report suggests Greek debt is likely to fall far more slowly than hoped –
… to only 160 per cent of economic output by 2020 – well below the target of 120 per cent set by the International Monetary Fund. Under such a scenario, Greece would need about €245bn in bailout aid, far more than the €170bn under the “baseline” projections eurozone ministers were using in all-night negotiations in Brussels on Monday.
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