BRUSSELS Nov 21 Greek debt can fall to below
120 percent of output by 2020 only if euro zone countries accept
losses on their loans to Athens, provide additional financing or
force private creditors into selling Greek debt at a discount,
according to a document prepared for a meeting of finance
ministers on Tuesday.
The 15-page document shows that without a package of
debt-reducing measures Greek debt will fall to 144 percent of
GDP in 2020, 133 percent in 2022 and 111 percent of GDP in 2030,
from a current level of around 170 percent.
"The package of options will not make it possible to arrive
at a debt-to-GDP ratio of close to 120 percent in 2020 without
taking recourse to measures that would entail capital losses or
budgetary implications for euro area member states or envisage a
more comprehensive DBB entailing the activation of collective
action clauses," the document said.
"It may therefore be considered to postpone the benchmark
for debt sustainability to 2022 by when Greece's debt-to-GDP
ratio can be expected to fall below 120 percent, through the
joint application of the ... measures," it said.
The document said a reduction of interest rates on bilateral
loans to Greece by 70 basis points from the current 150 basis
points above financing costs would cut debt by 1.4 percent by
2020. A much deeper cut to 25 basis points would result in debt
falling by 5.1 percent of GDP by 2020.
Deferring interest payments by 10 years to 2022 on loans
made through the euro zone's temporary rescue fund would cut
Greek debt by 43.8 billion euros, or 16.9 percent of GDP.
If the European Central Bank (ECB) returned the profits it
made on its Greek bond portfolio, Greece's debt would be fall by
a further 4.6 percent in 2020, the document showed.
Buying back 10 billion euros worth of Greek bonds from
private investors at 50 cents per euro would result in debt
falling by 2.4 percent of GDP by 2020.
But the combined elements would still fail to reduce the
overall debt-to-GDP ratio to 120 percent by 2020, the level the
IMF has deemed as "sustainable". If that target cannot be
reached, the IMF may withdraw from the Greek bailout programmes.