BRUSSELS Feb 20 Greece will need
additional relief if it is to cut its debts to 120 percent of
GDP by 2020 and if it doesn't follow through on structural
reforms and other measures, its debt could hit 160 percent by
2020, a debt sustainability report by the IMF, European Central
Bank and European Commission shows.
The baseline scenario is that Greece will cut its debt to
129 percent of GDP in 2020 from 160 percent now, well above the
targeted 120 percent, the confidential, 9-page analysis prepared
for euro zone finance ministers showed.
"The results point to a need for additional debt relief from
the official or private sectors to bring the debt trajectory
down," said the report, dated Feb. 15 and obtained by Reuters.
The report forms the basis of discussions of euro zone
ministers on the conditions under which Greece is to get further
financial help from the euro zone and the IMF.
"There is a fundamental tension between the program
objectives of reducing debt and improving competitiveness, in
that the internal devaluation needed to restore Greece
competitiveness will inevitably lead to a higher debt to GDP
ratio in the near term," the report said.
"In this context, a scenario of particular concern involves
internal devaluation through deeper recession (due to continued
delays with structural reforms and with fiscal policy and
privatisation implementation)," it said.
"This would result in a much higher debt trajectory, leaving
debt as high as 160 percent of GDP in 2020. Given the risks, the
Greek program may thus remain accident-prone, with questions
about sustainability hanging over it," it said.
The report said that debt could be reduced to 120 percent
from 129 percent through a restructuring of the accrued interest
on Greek bonds, which would shave 1.5 percentage points off the
A further 1.5 percent could be obtained from lowering
interest rates on bilateral euro zone loans extended to Athens
under the first bailout programme and 3.5 percentage points
could be saved by restructuring the portfolios of Greek bonds
held by euro zone central banks in their investment portfolios.
The biggest contribution to the debt reduction, however,
could come from the ECB forgoing profits on the Greek bonds the
central bank bought under a market intervention programme since
2010 as it would cut the debt by 5.5 percentage points.