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Greek Debt Is Viable and May Not Need Fresh Haircut

Reuters, citing European officials, claimed that the Greek debt may not need a fresh haircut since it is viable. According to the news agency, “the euro zone is reconsidering whether Greece needs the additional debt relief it has been hoping for, because its economic reforms and improved prospects have changed the arithmetic.”
Describing a re-evaluation by some of Greece’s partners, Eurozone officials told Reuters that no decision would be taken until a new analysis of whether Athens can service its debt has been completed.
Greek government officials said Athens was not aware of any re-evaluation and said the country deserved to be given the relief as promised.
“When you look at the debt sustainability path, which was done when the current programme was structured, the calculations are that Greece is now on its path and will continue on it without additional measures,” a Eurozone official said.
“There would not be a real reason to grant them any new concessions on length of loans or the interest rate.” As Reuters mentioned, the promise of a debt relief two years ago was necessary for Greece, in order for the International Monetary Fund (IMF) to remain in the country’s rescue program.
The IMF insisted on that because in November 2012 it seemed that without further action, Greece would struggle to cut its debt from an expected 175% of GDP in 2016. The latest European Commission forecasts show Greek debt will peak at 175.5% this year, dropping to 157.8% in 2016.
These news were handed to the Greek side, which, as Reuters mentioned, has strongly reacted. The Greek side considers a lift of its lenders’ commitments as a “punishment.” It referred to a Greek official who has stated that Athens needed debt relief “not because we can’t live without it, but because we deserve it as a reward for our success.”

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