Exclusive: Greek debt load may get heavier, euro zone study says
By Jan Strupczewski
BRUSSELS (Reuters) - Greece will need additional relief if it is to cut its debts to 120 percent of GDP by 2020 and if it doesn't follow through on structural reforms and other measures, its debt could hit 160 percent by 2020, a confidential analysis conducted by the IMF, European Central Bank and European Commission shows.
The baseline scenario in the 9-page report, obtained exclusively by Reuters, is that Greece will cut its debts to 129 percent of GDP by 2020, well above the 120 percent target.
"The results point to a need for additional debt relief from the official or private sectors to bring the debt trajectory down," said the report, which is being discussed by euro zone finance ministers at a meeting in Brussels on Monday to decide on a second financing program for Greece.
"There is a fundamental tension between the program objectives of reducing debt and improving competitiveness, in that the internal devaluation needed to restore Greece competitiveness will inevitably lead to a higher debt to GDP ratio in the near term," says the report, dated February 15.
"In this context, a scenario of particular concern involves internal devaluation through deeper recession (due to continued delays with structural reforms and with fiscal policy and privatization implementation).
"This would result in a much higher debt trajectory, leaving debt as high as 160 percent of GDP in 2020. Given the risks, the Greek program may thus remain accident-prone, with questions about sustainability hanging over it," it said.
The analysis cautioned that Greece may not be able to implement all the necessary changes quickly enough.
"The Greek authorities may not be able to deliver structural reforms and policy adjustments at the pace envisioned in the baseline," it said. Continued...