2030: the year Greece should return to the markets according to leading Brussels think tank

It was only two months ago that Greek Prime Minister Antonis Samaras confidently stated that Greece would be returning to the markets in 2014.

But according to economists from the Brussels based Bruegel think tank, that shouldn’t happen this year. Or this decade. In fact it shouldn’t happen until 2030.

According to a paper released today titled, “The long haul: managing exit from financial assistance,” the plans to potentially ease the terms of Greece’s bailout that are currently being discussed by the troika, even if implemented, would likely leave the debt at unsustainable levels. Specifically by 2022 even assuming optimistic levels of economic growth the debt would still stand at 120% of GDP, higher than the 110% target agreed by the eurozone and the IMF.

The authors also state that according to slightly less optimistic scenarios in 2030 Greece could find itself with its debt at 120% of GDP and forced to borrow a massive 145 million euros from the markets.

The authors instead propose a different ‘least unacceptable’ option. As outlined in the Wall Street Journal the basic points of this plan are as follows:

• Greece should receive another 40 billion euros in bailout loans with the aim of staying out of the markets until 2030. This would also require that Greece maintain a primary budget surplus of 4% from 2022 onwards and raise 22 billion euros from privatizations.
• Europe must also help kick-start growth in the country by drastically increasing investments.
• The euro-zone must also accept that it may have to forgive Greece all interest payments on bailout loans.

While the Bruegel economists effectively agree with what many in Greece have been saying for many months now – i.e. that the current troika plan is doomed to failure and that some measure of debt or interest payment forgiveness will be required – their plan would also have a less palatable consequence for Greeks: that the country would remain ‘under surveillance’ at least until 2030.

That is, for at least another 15 years Greek governments would have to abide by the conditions set by the country’s lenders when establishing policies.

As the authors put it,  “Even assuming all goes well, [Greece, Portugal and Ireland] will be subject to enhanced post-programme surveillance for decades. Managing such long-term relationships will be a key challenge.”