Greece: Preliminary Debt Sustainability Analysis-Updated Estimates and Further Considerations

IMF Staff Country Reports, May 23, 2016

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This paper provides preliminary debt sustainability analysis (DSA) of Greece.
When the first program was adopted in May 2010, debt was deemed sustainable, but not with high probability.
The much deeper-than-expected recession necessitated significant debt relief in 2011–12 to maintain the prospect of restoring sustainability.
Serious implementation problems caused a sharp deterioration in sustainability, raising fresh doubts about the realism of policy assumptions, especially from mid–2014.
Developments since last summer suggest that a realignment of critical policy, and DSA assumptions can no longer be deferred if the DSA is to remain credible.
Staff believes that revised program targets remain sufficiently ambitious to warrant continued support from Greece’s European partners.

Debt sustainability was initially judged as "sustainable, but not with high probability" as of May 2010.
The recession was "much deeper-than-expected", creating the need for "significant debt relief in 2011–12".
From mid–2014, "serious implementation problems caused a sharp deterioration in sustainability".
Recent developments (since last summer) imply that realignment of critical policy and DSA assumptions is necessary for credibility.
Staff assessment: revised program targets remain "sufficiently ambitious" to warrant continued support from European partners.

Realign critical policy assumptions and DSA assumptions without further deferral to restore credibility of the DSA.
Continue engagement and support from Greece’s European partners given the ambition of revised program targets.

Subject keywords listed: Asset and liability management, Debt relief, Debt sustainability, Debt sustainability analysis, External debt, Financial institutions, Fiscal policy, Fiscal stance, Loans.
Additional keywords: Africa, CR, debt burden benchmark, debt path, Debt relief, debt restructuring, debt restructuring modality, debt restructuring scenario, debt restructuring solution, Debt sustainability, Debt sustainability analysis, debt sustainability consideration, DSA risk assessment, Fiscal stance, GDP, GLF loan tranche, Greece, gross financing, interest rate, ISCR, Loans, proceeds, public sector Debt Sustainability Analysis, restructuring scenario.
The paper is part of IMF Staff Country Reports.