*TSIPRAS: GREECE CAN'T PRETEND ITS DEBT BURDEN IS SUSTAINABLE
The German response, via tabloid Bild,
"There must be an end to this madness. Europe must not be made to look stupid."
Fast forward to this:
*Did I say we "can't" pretend? Sorry, I meant we CAN pretend...
Immoral of the story:
If you don't lie, you don't get the money. This is solely a Greek problem, because Spain and Italy have no qualms about lying.
Meanwhile, the truth is Missing in Action:
The real problem is not the legacy debt, it's the recurring deficit.
The truth is that Greece has been restructuring its debt since 2012, and its debt service costs are actually not that onerous:
"Greek debt is currently 175% of GDP"
however...
"In 2014 Greece had to devote 4.3% of GDP to pay interest on public debt. This figure is a massive reduction compared with the crushing burden of more than 7% in 2011: debt restructuring has helped. Note also that the current figure is considerably lower than in Portugal and Italy, and about the same as in Ireland. "
"there has been a general decline in the interest rates paid on their outstanding debt by Member States, but the decline in Greece is particularly dramatic. From slightly above the average of the countries considered here, at 4.7%, the effective rate declined to just 2.4%, one of the lowest in the monetary union and – I dare say a surprise to many – actually a fraction lower than that paid by Germany. This is a reflection of the improved conditions (belatedly) offered to Greece in 2012."
That speaks to interest costs, what about principal repayment? Bearing in mind that ALL sovereign bonds are non-amortizing and every government just rolls them over when they mature i.e. issues a new bond to replace the maturing one, nevertheless...as we see from this Bloomberg article, the largest loans (EFSF) mature in 32 years and don't require any payment until 2023
So, if immediate debt service costs are really just 4.3% of GDP, then why is the Greek deficit still -12%. And if there was no debt whatsoever, who would still fund the -8% Greek budget deficit?
