Debt Issue in Greece

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Even after an orderly debt restricting Greece is unlikely to recover access to international capital markets for government bonds in the near future. Greece will have to rely on tight monitoring under the financial umbrella of an EU-IMF program in the years to come. Even post-debt restricting, there is no guarantee that the government will succeed in its dual goal of restoring fiscal solvency and closing the competitiveness gap. Yet I think Greece stands a better chance of accomplishing this from inside rather than outside the EMU.

Conclusion

In conclusion today the situation of the county is difficult. Greece has reached a point where, under any plausible macroeconomic scenario, public debt will continue growing faster than the GDP. Fiscal consolidation alone cannot close the solvency gap. A substantial reduction in the stock of debt is needed. Even post-debt restricting, there is no guarantee that the government will succeed in its dual goal of restoring fiscal solvency and closing the competitiveness gap. Yet, I think Greece stands a better chance of accomplishing these goals from inside the EMU rather than outside it. The Greeks have severely struggled with their finances sense they gained the confidence to attain the euro over the past drachma currency.

The accumulated debt of Greece has been at its highest in history and it will take numerous years to be competitive in the global market again. Sustainable a re-development of Greece’s debt from help of the EU and IMF can effectively put the country on track to successfully pay back the debt owed to foreign private sectors and other hierarchy economies. The euro will again become a superior currency and European’s can proudly honor the fundamentals of the Eurozone as a collective organization. Debt re-structuring in the short-run would generate countless public taxation and cut major government spending costs, but in the long-run Greece’s economic foundation will be trusted, stabilized and more financially efficient. Thus, allowing international investors and banks to gain levels of confidence in Greek assets without the fear of Greece potentially abandoning the euro for a lesser-valued drachma.

Bibliography

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