Πως θα πρέπει να γίνει η αναδιάθρωση του Ελληνικού χρέους και ποιες θα είναι οι επιπτώσεις της;

Σ΄ένα άρθρο με τίτλο «Πώς θα πρέπει να γίνει η αναδιάρθρωση του ελληνικού χρέους και ποιες θα είναι οι επιπτώσεις της» που δημοσιεύθηκε στην Καθημερινή την Κυριακή 9 Μαΐου 2011, οι Νίκος Οικονομιδης και Roy Smith ορίζουν και αναλύουν τις διάφορες εναλλακτικές λύσεις αναδιάρθρωσης και χρεοκοπίας που μπορει να εφαρμόσει η Ελλάδα. Επιχειρηματολογούν ότι η καλύτερη λύση για την Ελλάδα και για τους δανειστές της είναι η εθελουσία αναδιάρθρωση του χρέους της που πρέπει να γίνει στους επόμενους 8-10 μήνες. Σε αυτή την εθελουσία αναδιάρθρωση, ομόλογα του Ελληνικού δημοσίου ανταλλάσσονται με καινούργια ομόλογα που έχουν εγγύηση για την ονομαστική τους αξία από τον Ευρωπαϊκό Μηχανισμό Στήριξης. Σε αυτή την ανταλλαγή, η Ελλάδα αγοράζει τα παλιά ομόλογά της στις τιμές που επικρατούν στην αγορά, και έτσι μειώνει σημαντικά το χρέος της.

Το άρθρο της Καθημερινής εδώ.

About N_Economides

New York University
This entry was posted in Τράπεζες και χρηματοοικονομικά, Ευρώπη, Μακροοικονομία, Δημόσια οικονομικά. Bookmark the permalink.

4 Responses to Πως θα πρέπει να γίνει η αναδιάθρωση του Ελληνικού χρέους και ποιες θα είναι οι επιπτώσεις της;

  1. Dear Nicholas and Roy,

    You consider as a key problem that a Debt-GDP ratio of 150% or above is a number which does not convince anyone inside or outside EU about Greece’s chances to cope with its indebtedness. You seem to propose that this is the main reason why (you predict):

    (a) Greece cannot stay on track until 2012

    (b) that lending to Greece by the IMF/EU will cease after 2012.

    Given the above disastrous predictions, you recommend the early restructuring (and a way to implement this restructuring) in order to smooth out the effects of a violent episode in case the Greek government is forced by facts to a unilateral involuntary default. In brief, the way I understand your argument is that your proposal might act as, (i) an antidote for a disaster scenario, and (ii) as a device for taking away this annoying 150% debt-GDP ratio that is a major burden for Greece’s credibility.

    I have learned a lot from your proposal(s) on the technical front. In fact, I am all for discussing antidotes against disaster scenarios. What I am totally against of, is the discussion of such antidotes in public. Your article is material for discussion behind firmly closed doors. By choosing to go public with your proposal, you give a signal that reform efforts have become issues of secondary importance and this reflects a feeling of desperation coming from experts. In a nutshell, exactly because you are experts giving public priority to these disaster-antidote issues, you make readers pessimistic and scared.

    Most issues regarding insolvency are discussed behind closed doors. The main reason is that the world’s global financial system has not yet restored the credibility it enjoyed four years ago or before that. This lack of credibility in the overall environment surrounding the Greek problem is the reason why the IMF/EU financing mechanism of Greece involves so tight international monitoring and feedback: in the Greek case very little is currently convincing (Greece’s politics, its productive infrastructure, its debt-GDP ratio, etc.); so, Greece is led, hand by hand, through a well-defined path with lots of monitoring and guaranteeing partners.

    The current frontline of Greece’s fight is how to beat its partisan interest groups in order to achieve commitment for facing its fiscal problem under the guidelines of the current IMF/EU plan (and the successors of such plans). After battles for keeping this frontline are won, then the next level is the reforms discussed in this forum. There is a long way to go, and one should not place a public-debate emphasis on plans that seem as retreat plans.

    The mechanism through which the public (and politicians) perceive issues as complex as the Greek problem is very simplistic (although far from naive). By publicly discussing a disaster antidote, the public perceives that experts are discussing a retreat plan in the middle of a crucial battle.

    An even more important reason I disagree with publishing proposals about disaster antidotes is the issue of adverse signaling towards our EU partners and the IMF: as Jacques puts it, we, as Greek economists on this public forum, should be discussing Greece’s constructive reform. If we make the mistake to (1) jeopardize losing any credibility we have left in the eyes of EU partners because we are discussing practices that do not focus on our major reform responsibilities, and (2) let speculators know that we are discussing disaster antidotes, then we are harming both ourselves and our EU partners by causing frustration.

    Behind closed doors I would be delighted to give you comments and suggestions on the technical part (and also to learn more about it). Yes, your accounting is right: a 150% debt-GDP ratio is a heavy burden, and it adds enormously to our problems. But, in my opinion, it is not the time to convince anyone that alleviating the burden in the way you propose for the next few months is the starting point. The reason is, in this truly hazardous world, and inside the Euro zone, the one and only way for Greece to cope with its problem is to find a way to comply with guidelines of a highly controlled trajectory as this proposed by the EU/IMF (in my opinion). To the extent that Greece complies, that kind of help makes sense to continue, and this will give a chance to smoothly restore Greece’s credibility.

    Debates on disaster antidotes and disaster-survival practices while disaster may (or may not) be approaching should be kept behind closed doors: the public (and politicians) can wrongly start thinking that technicalities discussed by experts are priorities. In my opinion, our priority now is to follow the safer way offered and to communicate to politicians and the public why, indeed, this is our priority.

    With great respect,

    Christos Koulovatianos

    PS. As you understand, I disagree with the view that a restructuring should be part of a plan to be put on the table as a short-term strategy, even behind closed doors. Your working hypothesis is that our cooperation with the EU is fragile and that we may need to restore our credibility of international markets soon (or soon after some shock therapy). I think Greece should focus on restoring its credibility among its EU partners and to ignore others in the short run. This is a long debate, and it is more of a politico-economic debate rather than a macroeconomics/public-finance/development one, and I do not wish to pursue it now/here. My main point is that experts should be careful about making their thoughts public: the danger of getting misunderstood is enormous nowadays.

  2. Dear Jacques,

    1. There is no doubt that Greece cannot pay back its full debt. It is currently 150% of GNP and increasing given the deep recession. If you disagree, I invite you and anyone else to show/publish a credible macroeconomics model that allows Greece to repay its full debt over any length of time. Neither you or I like it that Greece cannot repay the full amount, but it is reality.
    2. I believe reforms have to be done, and I do not advocate deviating from reductions in public expenses and increases in revenue. This must be the first priority of any Greek government. However, even if these programs are done perfectly, Greece will not be able to repay the full debt. So, the problem of the debt remains.
    3. Now that we know that there will be some kind of debt relief, we should discuss how it will be done optimally. Roughly, there are two major alternatives:
    (a) A hard (involuntary) default: Greece tells its creditors it cannot pay. It ends up paying 30-50 cents on the euro (that’s what S&P estimates). he process is messy and takes a couple of years.
    (b) A voluntary restructuring: Greece asks creditors to voluntarily exchange their bonds with new, higher quality ones. This exchange has three features.
    (i) New bonds have their face value guaranteed through Greece purchasing Euro bonds or getting an ESM guarantee (a-la-Brady Bonds).
    (ii) New bonds have long maturities.
    (iii) Old bonds are bought by Greece at their market price (presently 30% below par), and therefore there is a 30% haircut (or more if we delay).
    The higher quality of the new bonds and the avoidance of further losses will imply that vast majority of the bonds will be voluntarily exchanged. Greece can be back in the financial markets in six months.

    If you look carefully at the alternatives (a) and (b) you will see that (b) is much better for all parties (Greece, creditors, EU).

    Now you say that the ECB will not accept the new Greek bonds as collateral. This would be contradictory since the ECB already accepts the present, lower quality Greek bonds. Second, at a time of crisis, it is insane for a central bank not to provide liquidity to the banking system and let it collapse. This is not a credible threat and it should be seen as such. Third, the credibility of the ECB officials and the EU politicians is very low — a direct effect of changing their line almost every day. The ECB is currently in a public fight with Germany and has been changing its position on «reprofiling» almost every day. Fourth, the ECB and other bank regulators failed miserably in their task by allowing commercial banks to keep Greek sovereign debt in their books at full face value, although it is traded every day at a much lower price. If Greek debt was marked to market, this crisis would be much smaller, and it definitely would not be a serious threat for the EU banking system. Maybe the present hard stance of the ECB is an extreme reaction to its own mistakes …

    Politicians want to kick the problem further, and so do banks, given the perverse way they are allowed to keep their books. I think the problem will get worse over time, and the haircuts required will be bigger. It is important for Greece to consider such a restructuring while it still can. Otherwise, Greece will do a hard default with horrible consequences for itself and Europe.

    Best,

    Nicholas Economides

  3. D_Vayanos says:

    Dear Jacques,

    Thanks for your comment. It is good to have some discussion of these extremely important issues. While waiting for a reply by Nicholas Economides, who wrote the article on which you commented, let me make the following points:

    1. I do not think that Greece can realistically repay a debt that is about 150% of GDP. This would require primary surpluses exceeding 5% of GDP forever, which seems hard to achieve.

    2. I am very much against any type of unilateral restructuring, i.e., one decided by Greece without close coordination with its EU/ECB/IMF partners. I think that this would be catastrophic for Greece, for the reasons that you are mentioning (e.g., bank failures, Euro exit, etc).

    3. I think that structural reforms are key to Greece’s survival. In fact, I wish that Greece’s EU/ECB/IMF partners would insist even more on deep micro-level structural reforms. An example is fixing the highly underperforming justice system. This reform is crucial for attracting foreign investment and generating growth, but receives very little attention in the memorandum that Greece has signed with the EU/ECB/IMF. (On the justice system, see the article by Elias Papaioannou https://www.greekeconomistsforreform.com/wp-content/uploads/injustice_Papaioannou.pdf. For a broader overview of key structural reforms, see, for example, my recent article with Michael Haliassos https://www.greekeconomistsforreform.com/wp-content/uploads/Getting-Greece-back-on-Track-How-English.pdf.) The current emphasis by the EU/ECB/IMF is very much on the fiscal measures. But this is misguided, in my opinion. For example, privatizations will not be successful without reforming the inefficient labour laws under which public firms operate, without improving the investor protection framework in the stock market, and without reducing the ability of politicians to meddle in the private sector. (Which rendered previous «privatizations» ineffective.) Going for quick privatizations without fixing the institutional framework will be a failure, even in fiscal, i.e., revenue-generating, terms.

    4. Support for the reforms is currently less than 25%. This is partly because the public confuses reforms with austerity. The public’s belief is justified, to some extent, because austerity is the main type of “reform” that has been implemented so far, as the government has not been willing and competent enough to push through the deeper structural reforms that would raise productivity (e.g., true market liberalization, etc). The government has also failed to communicate to the public that structural reforms would benefit most of the population as they would raise incomes and lower social inequality.

    5. Given points (1)-(4), I see two alternatives. Alternative (a) is that the EU gives up on Greece, given the incompetence of its politicians and its inability to reform. Alternative (b) is that the EU engages at a deeper level on structural reforms in Greece, by emphasizing institutional changes and not only short-run fiscal results. Alternative (b) would also require some type of debt forgiveness to make the debt viable. My preference is for alternative (b). I have written an article with Costas Meghir and Nikos Vettas https://www.greekeconomistsforreform.com/public-finance/reform-and-restructuring/, where we sketch some ideas to make alternative (b) work.

    Best,

    Dimitri Vayanos

  4. Jacques DELPLA (from Paris) says:

    You are wrong; you paint a default as a manageable and mild problem and as an easy way to reduce your debt burden. No way. If Greece defaults (or restructure its sovereign debt) in 2011 (or later), Greece will be immediately cut off from EU/IMF loans and Greece will be forced to get out of the eurozone. I am a friend of Greece and I am all in favour of Greece staying in the euro. France (along the EC and the ECB) is adamantly opposed to any debt restructuring -and I agree fully. Why? If Greece were to follow your advice and restructure its sovereign debt, then the ECB would stop IMMEDIATELY to refinance Greek sovereign debt and Greek banks’ debt. The ECB acceptance of junk Greek debt is only on the assumption that Greece follows its IMF program and does not default). Never will the ECB refinance any defaulted debt -it would lose all its credibility. That would entail a sudden stop and a Heart attack for the Greek economy. Greece would have no other choice but to leave the euro. You should read more carefully the ECB’s comments recently: the ECB will never refinance defaulted debt. And they are serious here.
    Moreover, you assume that part of the IMF/EU €110bn euros loans could be used to recapitalize banks after a default. You are wrong too. If Greece defaults, the EU loans (and IMF too) will be stopped. France and the EU are not going to provide further loans to a country that has just defaulted onto them and has reneged on its commitments (after years of lies on its budget). We help Greece if Greece helps herself.
    So if Greece were to default (and a restructuring is a default) on its sovereign debt, then no more loans from the EU, no more refinancing and cheap loans from the ECB. In a nutshell, Greece will have to decide to leave the euro. The solution that you propose does not work for us. IT would destroy ECB credibility ; it would trigger a massive contagion to Portugal, Spain and Italy: «If you can cut your debt by a third, stay in the eurozone, an continue to receive nice and cheap loans from the EU, why not me?». we do not want that.
    France, which is the best friend of Greece in the eurozone now would not be able to lend further money. if Greece defaults. Our policy is to help Greece save itself and stay in the euro. France and the EU are ready to do a lot: lend further to Greece at low interest rates and «invite» French and EU private banks to follow, and that for many and many years. In exchange, we expect Greece to reform massively itself (and pay taxes!) and repay its sovereign debt. But if Greece defaults and reneges on its EU/IMF contract (which forbids default), as you advise, we stop our part of the contract. Your solution is economic suicide for Greece. And if Greece defaults and leaves the euro, it never will be accepted again in. Sorry, but any sovereign default for Greece = bankruptcy.
    Some Greek commentators try to blackmail us by saying explicitely or implicitely, that if Greece is forced to leave the eurozone, then the eurozone would explode; then you are forced to accept what we propose (including debt resstructuring). Indeed, if Greece leaves the euro, that is a bad hit for us (foremost politically, as France has done anything to avoid that). But a manageable problem: we will tel: any country that does want to stay in the euro will be supported. But if that country defaults, then the contract is broken. That may leave the eurozone without Greece (if she follows your advice) and Ireland (which follow you). Once again, we want Greece to stay in the eurozone, we are ready to lend a lot to Greece at cheap rates; but not if your default. Instead of illusioning the Greek people by writing articles on how to default on Greek debt, you should rather explain to the Greek readers how to reform Greece economy.

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