Thursday, May 20, 2010

Greek Debt Dynamics: Daunting but Feasible

by William R. Cline

Peterson Institute for International Economics
May 19, 2010

Recent market volatility seems to reflect severe doubts that the Greek rescue package can work and, by extension, that serious contagion to other larger European debtors can be avoided. Yet a close look at the numbers in the IMF program for Greece suggests that although the fiscal adjustment needed to secure debt sustainability is daunting, it is feasible. The prospects might be further enhanced by a more ambitious contribution to debt reduction from the proceeds of privatization. Ultimately, in view of the past history of debt crisis resolution, the determining factor for success or failure of the program will likely be political will.


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