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Greece Needs More Official Debt Relief—But How Much and at What Price?

Zettelmeyer, Jeromin, (2017), “Greece Needs More Official Debt Relief—But How Much and at What Price?”, Peterson Institute for International Economics, 4 April

Europe’s Greece problem, which brought the euro area to the brink of a breakup in 2015, is back in the headlines. And so, too, is the issue of whether Greece can succeed without more debt relief—an issue on which European officials remain at loggerheads with the International Monetary Fund (IMF) and among each other. In a new PIIE working paper, Eike Kreplin, Ugo Panizza, and I show that Greece will indeed need such relief, and discuss how it could be delivered. The good news is that this includes options within the political and legal red lines drawn by European finance ministers last year, which rule out outright debt forgiveness. The bad news is that these options will nonetheless raise formidable political challenges, as they imply that, in one way or another, Greece will owe debt to its European partners for a very long time. Indeed, under some options, Greece’s official debts would rise substantially before they fall again.

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