Diagnosing Greek debt sustainability: : Why is it so hard?

• Autores: Julian Schumacher, Beatrice Weder di Mauro
• Localización: Brookings papers on economic activity, ISSN 0007-2303, Nº. 2, 2015
• Idioma: inglés
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• Resumen

  • This paper analyses the serial misdiagnosis of Greek debt sustainability in the official sector lending framework. The standard debt sustainability analysis frameworks of the IMF and ESM have become inappropriate for Greece since they ignore the highly concessional terms of Greek debt. We show that two thirds of Greek debt contains grant elements of about 54%, and the present value of outstanding Greek debt is now about 100% of GDP, rising to about 120% under the new program. In spite of the exceptionally high debt relief already granted, these number still breach the thresholds of debt sustainability and suggest that further restructuring will be required. However, the main problem lies in the repayment flow over the medium term and in the question of burden sharing within the group of official creditors (European institutions and IMF). We also show that the lending policies of the IMF as well as the ESM have been adapted repeatedly to accommodate Greece, leaving the overall lending framework weakened.