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Debt Restructuring and Economic Prospects in Greece

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  • William R. Cline

    (Peterson Institute for International Economics)

Abstract

Severe recession in 2010–12 drove the need for sovereign debt reduction in Greece, despite a massive cut in government spending. The 2012 restructuring cut privately-held debt by about 50 percent, but much debt was exempt (IMF, euro area governments, ECB), and new borrowing was needed to recapitalize banks. In December an official sector package of lower interest rates, buybacks, and remittance of ECB profits on Greek bonds boosted total relief by about one third. Nonetheless, even under favorable conditions the ratio of debt to GDP is unlikely to be much below 120 percent by 2020, limiting market access for a country that has restructured with deep haircuts. Although Greek borrowing needs are now covered for several years, more relief from the official sector thus seems likely to be needed in the future.

Suggested Citation

  • William R. Cline, 2013. "Debt Restructuring and Economic Prospects in Greece," Policy Briefs PB13-3, Peterson Institute for International Economics.
    • Handle: RePEc:iie:pbrief:pb13-3
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    References listed on IDEAS

    as
    1. William R. Cline, 2011. "Sustainability of Greek Public Debt," Policy Briefs PB11-15, Peterson Institute for International Economics.
    2. Zsolt Darvas, 2012. "The Greek debt trap- an escape plan," Policy Contributions 759, Bruegel.
    3. William R. Cline & Guntram B. Wolff, 2012. "Resolving the European Debt Crisis," Peterson Institute Press: All Books, Peterson Institute for International Economics, number sr21, January.
    4. William R. Cline, 2012. "Sovereign Debt Sustainability in Italy and Spain: A Probabilistic Approach," Working Paper Series WP12-12, Peterson Institute for International Economics.
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    Cited by:

    1. Jeromin Zettelmeyer & Christoph Trebesch & Mitu Gulati, 2013. "The Greek debt restructuring: an autopsy [Greek bond buyback boondoggle]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 28(75), pages 513-563.
    2. David, Carfì & Daniele, SCHILIRO', 2014. "Improving competitiveness and trade balance of Greek economy: a coopetitive strategy model," MPRA Paper 76970, University Library of Munich, Germany.
    3. Agnieszka Kozera & Aldona Standar & Łukasz Satoła, 2020. "Managing Rural Areas in the Context of the Growing Debt of Polish Local Government Units," Agriculture, MDPI, vol. 10(9), pages 1-25, August.

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