The FT's Peter Spiegel has scoped up some additional details [9]from the 10 page debt sustainability analysis that is at the basis of the latest Greek bailout talks. Some of the critical details:
- "even under the most optimistic scenario, the austerity measures being imposed on Athens risk a recession so deep that Greece will not be able to climb out of the debt hole over the course of the new €170bn bail-out."
- A German-led group of creditor countries – including the Netherlands and Finland – has expressed extreme reluctance since they received the report about the advisability of allowing the second rescue to go through.
- A “tailored downside scenario” prepared for eurozone leaders in the report suggests Greek debt could fall far more slowly than hoped, to only 160 per cent of economic output by 2020 – far below the target of 120 per cent set by the International Monetary Fund
- Under such a scenario, Greece would need about €245bn in bail-out aid, nearly twice the €136bn under the “baseline” projections.
- “Prolonged financial support on appropriate terms by the official sector may be necessary,” the report said, a clear reference to the possibility that bail-out funds may be needed indefinitely.
- Even in best case scenario country will need at least €50 billion on top of €136 billion.
- A recapitalisation of the Greek banking sector, which originally was projected to cost €30bn, will now cost €50bn. A highly touted Greek privatisation plan, which originally hoped to raise €50bn, will now be delayed by five years and bring in only €30bn by the end of the decade.
Translated, this is yet another confirmation of what we have claimed all along - that Germany is no longer playing along.