Eurobank: Debt relief framework should be expanded to include even most pessimistic forecasts

1 June 2017
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A special study by Athens-based lender Eurobank has calculated that the current framework in place for Greek debt relief, as decided during a May 2016 Eurogroup, may not be sufficient to ensure debt sustainability under the most pessimistic forecasts.

Results of the study were announced this week and in the wake of a grim IMF forecast extending some four decades into the future regarding Greek economic growth. The Fund estimates that the annual GDP increase in the country, on average, will be an anaemic 1 percent.

The study notes that under the current medium-to-long-term framework the biggest re-adjustment in the Greek debt will be achieved through an extension of maturities and a lowering interest rates, primarily on loans provided by the ESM and EFSF under the second memorandum.

Such a scenario would ostensibly not further burden countries that participated as lenders in the bailout or in the EFSF.

Nevertheless, the main conclusion of the study holds that the current framework should be more liberal and possibly expanded, in order to ensure that debt sustainability is achieved even under extremely negative long-term scenarios, such as the IMF’s prediction.

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