STOCK MARKET WATCH -- Monday, 29 October 2012

[xchrom]

35. Another Default? Troika Calls for New Debt Relief for Greece

http://www.spiegel.de/international/europe/greek-creditors-propose-new-debt-haircut-for-athens-a-863999.html



For all of the uncertainty surrounding Greece's future in the euro zone and the mixed messages regarding the political and economic reform process in the country, the math is actually relatively simple. Current plans call for Greece's sovereign debt to drop to 120 percent of gross domestic product by 2020. But the country's debt load is 169 percent of GDP and it is expected to rise to 179 percent by the end of next year. In absolute terms, that is almost €350 billion ($451 billion).

Paying that down will require nothing short of an extended economic miracle in the Mediterranean country, an eventuality not looking terribly realistic following five years of economic shrinkage and a sixth on the horizon.
The other option? Another partial default. That, indeed, would seem to be the conclusion that Greece's main international creditors have come to. According to information received by SPIEGEL, representatives of the so-called troika -- made up of the European Central Bank, the European Commission and the International Monetary Fund -- proposed just such a debt haircut at a meeting last Thursday held in preparation for the next gathering of euro-zone finance ministers.

The proposal is not uncontroversial. At the beginning of this year, a similar debt relief plan resulted in just over €100 billion being shaved off of Greece's mountain of debt. But that money all came from private investors. This time around, public creditors would be involved, meaning that taxpayer money from those countries which have stood behind Greece would vanish off the books.