Troika report paints bleak picture

BRUSSELS – The huge difficulties and risks that Greeks and the government in Athens will have to face at least until the end of this decade are evident in a provisional report compiled by the International Monetary Fund, the European Commission and the European Central Bank — collectively known as the troika.

Only the full and timely application of the streamlining program agreed with the government will render Greece?s public debt sustainable in the medium term, although even then an additional support package amounting to 50 billion euros may be needed, the report concludes.

The troika acknowledges that the long-term prospects of the Greek economy have deteriorated due to the recession in the eurozone and the delayed implementation of structural reforms. At the same time the authors of the report recognize — though not in clear terms — some errors in the planning of the first streamlining program, as it now places more emphasis on the improvement of competitiveness.

The possibility of the attempted internal devaluation leading to a much greater recession owing to the continued delays in the application of reforms and the privatization program, as well as the counterproductive fiscal measures, has aggravated the troika?s worries. This pessimistic scenario projects Greece?s debt reaching as high as 159 percent of gross domestic product in 2020, meaning that the restructuring of the Greek debt might not work after all.

Worse, Greece could need a total of 245 billion euros of funding by 2020, and political conditions could dissuade creditors from lending another helping hand, leading to a disorderly default and an exit from the eurozone.

The optimistic scenario provides for the successful application of the program, unlike with the previous program, bringing the debt down to 120 percent of GDP by 2020. Greece?s funding by 2015 will amount to 130 billion euros, plus 36 billion euros left to come from the first bailout package. It is also possible another 50 billion euros will be needed for the 2015-20 period.