GREECE’S finance minister hailed the country’s latest bailout deal yesterday, saying that politicians had avoided “a nightmare scenario”.
“It is maybe the most important [deal] in Greece’s post-war history,” Evangelos Venizelos argued, welcoming the “long-term support” that he says will enable Greece to stay in the Eurozone.
Yet research by the troika of main lenders – the European Union, European Central Bank and International Monetary Fund – showed that there remains an uphill struggle to save Greece from any future default.
“There is a fundamental tension between the programme objectives of reducing debt and improving competitiveness, in that the internal devaluation needed to restore Greece’s competitiveness will inevitably lead to a higher debt to GDP ratio in the near term,” the analysis said.
“Given the risks, the Greek programme may thus remain accident-prone, with questions about sustainability hanging over it.”
Delays to the required structural reforms and privatisations would pose a particular risk to the strategy of getting Greece back on track, it said.
Hold-ups in the implementation of agreed reforms “would result in a much higher debt trajectory,” the research found, “leaving debt as high as 160 per cent of GDP in 2020.”
The troika aims to slash Greek debt to the equivalent of 120 per cent of GDP by 2020, yet the plans rely on Greece returning to healthy growth.