Greece Will Default Unless It Can Make These 'Frightening And Unrealistic' Fiscal Adjustments

A Brussels think tank says you’re dreaming if you think Greece can avoid restructuring its debt, and that debtors should take a 30% haircut now.

Bruegel’s Zsolt Darvas reached this conclusion by looking at the surplus Greece will need to run in order to pay off debts:

The primary surplus required to reduce the debt ratio to 60 per cent of GDP in 20 years would be 8.4 per cent of GDP. It would reach 14.5 per cent of GDP under the cautious scenario. This would imply devoting between one-fifth and one-third of tax revenues to interest payments on public debt.

And there’s no way Greece can run that kind of surplus. Darvas tells the Katimerini: “If you look at realistic scenarios and at history, then it’s very unlikely that Greece can avoid restructuring its debt.”

As you can see from the chart, Ireland also faces a “frightening adjustment”:


See who gets pounded in a Greek debt haircut >

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