Tuesday, March 13, 2012

Greece Lenders Warn of Deeper Cuts Ahead

Wall Street Journal
March 13, 2012

Greece's economy will remain in severe recession this year and activity will "at best" stagnate next year, forcing the country to make additional spending cuts of 5.5% of gross domestic product over the next two years to meet fiscal targets, a report by the country's lenders said.

The report, part and parcel of a new €130 billion ($171.02 billion) bailout for Greece, which is expected to be signed later this week, paves the way for Greece to receive its first aid under the new program, starting this month.

The report by the European Commission, the European Central Bank and the International Monetary Fund said that Greece's debt could still fall below levels demanded by public lenders in exchange for the second bailout package by 2020, following a successful debt-relief plan.

The so-called troika of public lenders forecasts that Greece's debt level could fall to around 117% of GDP by 2020, below the original 120% level. The lower debt-to-GDP target reflects the success of a massive debt exchange last week, which attracted strong participation from investors, resulting in a €105 billion debt reduction for Greece.


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