In the most significant news of the day if not the week and year, yesterday saw EU finance ministers agree upon and sign the long awaited 130bn Euro bailout package for Greece. The agreement is set to prevent the feared default early next month. The agreement came after Athens finally committed to ratify the nationally unpopular austerity measures demanded by the EU.
The agreement was hailed as a significant move for for Greece, however immediately following the agreement, doubts began to emerge as to whether the agreement and package goes far enough to deal with Greece’s growing debt problems.
Greece will need more help if it is to bring its debts down to the level envisaged in the bailout and will remain “accident prone” in coming years, according to a deeply pessimistic report by international experts obtained by Reuters. A report prepared by experts from the European Union, European Central Bank and International Monetary Fund said Greece would need extra relief to cut its debts near to the official debt target given the worsening state of its economy. If Athens did not follow through on economic reforms and savings to make its economy more competitive, its debt could hit 160 percent by 2020, said the report.
After 13 hours of talks, ministers finalized measures to cut Greece’s debt to 120.5 percent of gross domestic product by 2020, a fraction above the target, to secure its second rescue in less than two years and meet a bond repayment in March. 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 confidential analysis conducted by the IMF, European Central Bank and European Commission shows.
The baseline scenario in the 9-page report, obtained exclusively by Reuters, is that Greece will cut its debts to 129 percent of GDP by 2020, well above the 120 percent target.
