...As long ago as 2010, when Greece was first bailed out, many knowledgeable observers, including some members of the I.M.F.’s board of directors, worried that Greece would never be able to pay back all of its debts—its total debt burden is about a hundred and seventy five per cent of the country’s G.D.P.—and advocated imposing a haircut on its creditors. Rather than doing this, the European Union, the European Central Bank, and the I.M.F. loaned the Greek government money to pay its creditors, which were mostly European banks, at a hundred cents on the dollar. In the now-famous words of Karl Otto Pöhl, a former head of the Bundesbank, the bailout “was about protecting German banks, but especially the French banks, from debt write-offs.” (of course)
....On Friday, Tsipras seized upon the report, describing it as “a great vindication for the Greek government as it confirms the obvious — that Greek debt is not sustainable.” That is true.* But the report also warns that six months of arguing and brinksmanship has left the Greek economy in urgent need of more credit—more than fifty billion euros between now and 2018, of which about thirty-six billion euros will have to come from Greece’s European partners.
..One option the report considers involves extending the terms of Greece’s loans from twenty years to forty years, and doubling, from ten to twenty years, the grace period during which it doesn’t have to make any principal repayments. This, in itself, would amount to a significant hit to creditors (!!!). But what if the best Greece can manage over the long haul is to run a primary surplus of 2.5 per cent (rather than the 3.5 per cent called for in the latest offer), which seems a bit more realistic (!)—and the economy grows in line with the historical trend? Then, the report concludes, in addition to doubling the grace period for principal repayments and extending the maturities on Greece’s loans, the country’s creditors would have to write off more than fifty billion euros’ worth of debts....
