| NEW YORK
NEW YORK Nov 13 Nations often owe creditors
more after debt restructurings - not less - as limping
economies, weakened banks and more take their toll, Moody's
Investors Service said on Tuesday, suggesting that debt-laden
Greece could be in for more pain ahead.
"We basically found that Greece's experience is not unique,"
said Elena Duggar, an analyst with the credit policy group at
Moody's Investors Service.
"In about half of sovereign-debt exchanges, debt levels
actually rise after the exchange, compared to what they were in
the year before. In another 20 percent, they fall only
marginally," she added.
That happens for several reasons. For one thing, those debt
deals often extend maturities or reduce coupon payments, but
don't necessarily include a haircut on principal, Moody's said
in a report on sovereign defaults from 1997 to 2012.
When a lender is forced to take a haircut on an investment,
it is essentially accepting less than the face value of the
asset held in its portfolio.
For another, the very pressures that led to a debt
restructuring in the first place often remain, including
shrinking economies and banks that might need propping up from a
sovereign, the study added.
And finally, in many cases, weaker domestic currencies mean
an increase in the value of foreign-currency debt relative to
the domestic economy, the report said.
Sovereign bond restructurings might help liquidity, but
"often fail to provide solvency relief," Moody's said.
Restructuring does help, Duggar emphasized. But "it doesn't
obviate the need for continued fiscal adjustment and hopefully a
return to growth."
Greece's overall debt will hit 179 percent of GDP this year,
higher than the 171 percent of GDP in 2011, before rising
further in 2013, the report said.
Despite a bond-exchange deal earlier this year, Greece is
still suffering from economic contraction. Its debt-to-GDP ratio
is expected to rise to 190 percent next year before consensus
forecasts from international lenders show it dropping back to
around 144 percent of GDP in 2020. [ID: nL5E8MCHNR]
Greeks exhausted by waves of budget cuts have protested in
the streets - sometimes violently - as the country remains mired
in its fifth year of economic contraction.
"It's a lot of pain" by countries in default, Duggar said.
"Whenever growth is also impaired, it takes even longer."
Greece's economic output will have dropped by a quarter
since 2008 in a vicious spiral of austerity and recession.
"It's a long road," Duggar added.