The debt in sim­ple math­e­mat­ics

Kathimerini English - - Front Page - BY STAVROS LYGEROS

It took one pub­li­ca­tion­say­ing that Ger­many was ready to agree to an ad­di­tional loan of 60-65 bil­lion eu­ros for op­ti­mism to soar in Greece. Even the gasp­ing Athens stock ex­change perked up. The truth, how­ever, is that clouds con­tinue to darken the hori­zon, as the mem­o­ran­dum is based on the as­sump­tion that by early 2012 Greece will be ready to re­turn to the mar­kets. The way things look right now, though, it is un­likely that the mar­kets will be ready to open their doors to Greece. In or­der for a de­fault to be avoided, Greece needs to ei­ther re­struc­ture its debt or to re­ceive ad­di­tional loans. The Euro­pean Cen­tral Bank re­jects the idea of re­struc­tur­ing. The only op­tion that is un­der con­sid­er­a­tion is a vol­un­tary re­pro­fil­ing to avoid trig­ger­ing credit de­fault swaps. This is the rea­son why the eu­ro­zone is in­creas­ingly warm­ing to the so­lu­tion of a new loan pack­age. But let us look at the is­sue in terms of num­bers: Even on the off chance that Greece’s pri­mary debt is com­pletely wiped out, in 2012 it will have to pay some 52 bil­lion eu­ros (35 bil­lion in ma­ture bonds and 17 bil­lion in in­ter­est), while it is ex­pected to re­ceive 12 bil­lion eu­ros from the troika. In 2013, Greece is not ex­pect­ing to re­ceive any­thing from the troika, but it will still need to pay ap­prox­i­mately 44 bil­lion eu­ros (27 bil­lion in ma­ture bonds and 17 bil­lion in in­ter­est). Ba­si­cally, it needs to have more than 84 bil­lion eu­ros for the 2012-13 pe­riod alone, so even if it re­ceives a loan of 60-65 bil­lion eu­ros, it will still have a short­fall of 20-25 bil­lion. Os­ten­si­bly, this amount is sup­posed to be cov­ered by pri­va­ti­za­tions and the sell-off of state as­sets. Life, how­ever, does not end in 2013. Where will Greece find the tens of bil­lions of eu­ros it need an­nu­ally to ser­vice its mas­sive debt? And what will hap­pen af­ter 2014, when the amount to cover in­ter­est rises? The recipe of spend­ing cuts can­not alone make Greece’s debt sus­tain­able so that it can be­gin bor­row­ing from the mar­kets. In­clu­sion in the per­ma­nent Euro­pean mech­a­nism, mean­while, will merely re­cy­cle rather than solve the prob­lem by feed­ing spec­u­la­tion over Greece’s pos­si­ble ex­pul­sion from the eu­ro­zone. The re­vival of the Greek econ­omy can be achieved only with a bold re­form pro­gram and tidy­ing up ex­penses and rev­enues, in com­bi­na­tion with a ma­jor boost in the coun­try’s po­ten­tial through the ex­ploita­tion of flag­ging growth po­ten­tial on the one hand, and a debt hair­cut on the other.

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