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Forumer storico
Athens’ ability to stay course in doubt
By Alan Beattie in Washington
Early details of the financing package for Greece that were emerging on Thursday may have given some comfort to the financial markets. In particular the reductions in interest rates on official loans from the European Financial Stability Facility (EFSF) may have convinced some investors that Ireland and Portugal could escape a major debt restructuring.
But whether the measures likely to be announced are enough to restore Greece to sustainability will depend heavily on the writedown achieved in the private sector holdings of Greek debt. And here, economists stressed, the uncertainty about what investors might accept and the limited reductions that seemed to be on offer were much less convincing.
Proposals based on the plan from the Institute of International Finance involve swapping around €135bn of privately-held debt into much longer-dated bonds, which would relieve the funding pressure on Greece by increasing the average maturity of its bonds from less than seven years to nearly twenty.
But estimates suggested that operation would write down the net present value of debt by only around 20 per cent, much lower than most calculations of the necessary reduction.
Economists said that meant Greece would struggle to achieve sustainability even with cheaper official lending. Jacob Funk Kierkegaard at the Peterson Institute of International Economics in Washington said that, based on the sketchy early details circulating in the summit, Greece was still likely to end up with a debt burden comfortably above 100 per cent of gross domestic product.
“This package establishes some useful principles including cheaper loans from the EFSF and the idea that debt restructuring will happen only in insolvent countries like Greece, not illiquid governments like Italy’s,” he said. “But by and of itself it is not going to put Greece on a sustainable path”.
The forecasts in the eurozone and International Monetary Fund programme involved optimistic assumptions about growth and tax revenue, he said. “Absent a dramatic improvement in the business climate or Greece raising money by selling off its islands, I still think it is going to be a struggle to get investors to have confidence in Greece with such a high debt burden,” Mr Kierkegaard said.
“This package may put Ireland and Portugal on sustainable paths, but it is unlikely to be the end of the story for Greece,” he said.
(Financial Times)
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Non demordono e si arrampicano sugli specchi.
By Alan Beattie in Washington
Early details of the financing package for Greece that were emerging on Thursday may have given some comfort to the financial markets. In particular the reductions in interest rates on official loans from the European Financial Stability Facility (EFSF) may have convinced some investors that Ireland and Portugal could escape a major debt restructuring.
But whether the measures likely to be announced are enough to restore Greece to sustainability will depend heavily on the writedown achieved in the private sector holdings of Greek debt. And here, economists stressed, the uncertainty about what investors might accept and the limited reductions that seemed to be on offer were much less convincing.
Proposals based on the plan from the Institute of International Finance involve swapping around €135bn of privately-held debt into much longer-dated bonds, which would relieve the funding pressure on Greece by increasing the average maturity of its bonds from less than seven years to nearly twenty.
But estimates suggested that operation would write down the net present value of debt by only around 20 per cent, much lower than most calculations of the necessary reduction.
Economists said that meant Greece would struggle to achieve sustainability even with cheaper official lending. Jacob Funk Kierkegaard at the Peterson Institute of International Economics in Washington said that, based on the sketchy early details circulating in the summit, Greece was still likely to end up with a debt burden comfortably above 100 per cent of gross domestic product.
“This package establishes some useful principles including cheaper loans from the EFSF and the idea that debt restructuring will happen only in insolvent countries like Greece, not illiquid governments like Italy’s,” he said. “But by and of itself it is not going to put Greece on a sustainable path”.
The forecasts in the eurozone and International Monetary Fund programme involved optimistic assumptions about growth and tax revenue, he said. “Absent a dramatic improvement in the business climate or Greece raising money by selling off its islands, I still think it is going to be a struggle to get investors to have confidence in Greece with such a high debt burden,” Mr Kierkegaard said.
“This package may put Ireland and Portugal on sustainable paths, but it is unlikely to be the end of the story for Greece,” he said.
(Financial Times)
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Non demordono e si arrampicano sugli specchi.
