The London-base Research on Money and Finance (RMF) network of political economists has published a policy paper on the Greek debt, where the necessity of a “deep write-off” is argued.

In the paper co-authored by professor Kostas Lapavitsas and economist Daniel Munevar, it argued that the debt is a serious problem for the Greek because on top of the huge sums required for the repayment of relevant loans, harsh austerity measures and policies in place further stifles growth. The authors make two proposals, a ‘soft’ option of reducing the interest rate by 0.5% to 1% and a ‘hard’ option which entails cutting the nominal debt value to 60% GDP.

The first option would have a negligible effect on the debt, as it would only result in a 5% GDP reduction by 2019. This is due to the considerable restructure of 2012, while the average interest rate has been lowered to about 3%. Conversely, the ‘hard’ option would result in a 4.8% GDP reduction on an annual basis over the next five years. The benefits of the hard option are between three-and-a-half to six times greater than the soft option.

The paper concludes that should the Greek government continue with its current policies it will need 26 years to bring the debt down to 60%, and “effectively, the country would have to have austerity measures of one type or another for decades. This is clearly untenable for any democratic polity”.

The full paper is available for viewing here.