European Commission recommends substantial reprofiling of Greek debt
In a report released here, one day after a leaked International Monetary Fund (IMF) report that also raised concerns about Greek debt and the new bailout program requested by Greece, the Commission said it expected Greek debt to rise to 165 pct of GDP in 2020 and to 150 pct in 2022 if the government was to adopt satisfactory measures towards reducing its debt. In any other case, it warned, the Greek debt could reach 187 pct and 176 pct of GDP, respectively.
The Commission said the country will need debt-mitigating measures, such as a substantial reprofiling, but only after Greek authorities adopted a credible program and “demonstrate commitments to reform”.
"A very substantial re-profiling, such as a long extension of maturities of existing and new loans, interest deferral, and financing at AAA rates would allow to cater for these concerns from a gross financing requirements perspective, though they would still leave Greece with very high debt-to-GDP levels for an extended period," the European Commission's analysis said.
The European Commission said it expected the country’s GDP to shrink by 2-4 pct this year, instead of a 0.5 pct growth rate expected in spring and warned that a recession will continue in 2016 with the economy shrinking by 0.5 pct and 1.75 pct. The Greek economy is projected to return to positive growth rates in 2017 on the condition that political stability would be restored and capital control measures would gradually be withdrawn.
