Bloomberg considers Greek debt haircut necessary
Bloomberg’s financial analysts believe that a potential new deal between Greece and its creditors that does not include any provisions for a debt haircut will result in failure. The analysts justify their belief on the fact that the troika’s predictions have been proven wrong and many of the tragic consequences could have been avoided if the warnings about the program’s inherent problems were not down played.
The rumored new deal of extending deadlines to 50 years, reducing interest rates and providing a new loan may simply not be enough in the long-term to tackle the soaring Greek debt, which has reached 180% of the country’s GPD. The analysts stress that unless the troika learns from its mistakes, it will have to work out another deal in the future, with even fewer chances of success.
According to Bloomberg, the decision in 2010 to place the brunt of the burden on the shoulders of the Greek taxpayer, in order for creditors to avoid any loses, contributed to the explosion of the debt to the point that it is not viable. Bloomberg also cites the social implications of the troika’s errors, which have resulted in crippling unemployment and a collapse of the welfare state.
The analysts explain that while the troika has many reasons to doubt the Greek government’s commitment to carry out reforms, many of which are to the country’s benefit, it has not yet realized that social support for major reforms has long been exhausted.