Greece΄s debt remains unsustainable despite short-term relief from this week΄s deal with major creditors, and Athens will probably need some of the principal on its debts reduced eventually, Moody΄s Investors Service said Thursday.
Tuesday΄s deal with euro-zone finance ministers and the International Monetary Fund, unlocking the next 44 billion euros ($57 billion) in loan payments from Greece΄s bailout, “will provide relief to the liquidity-starved Greek economy, but we believe that the country΄s debt burden remains unsustainable,” Dow Jones reported citing Moody΄s credit report.
“The probability of a further default on privately held debt is high, and given that around 70% of the total debt stock is held by official creditors, only a reduction in principal on outstanding official debt would lead to a semblance of sustainability in Greece΄s debt,” the ratings company said.
The accord aims to lower Greece΄s debt through a mix of interest-rate cuts on loans to Athens, the European Central Bank returning profits linked to its holdings of Greek bonds to Athens and, possibly, a buyback of Greek debt at sharply discounted prices.
But “there are still significant implementation risks associated with the program, particularly given Greece΄s extreme economic and social fragility,” Moody΄s said. “It is not realistic to expect that the targets Greece has just agreed to will be met without any slippages.”
(source: Dow Jones, Capital)
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