It is an «illusion» to believe that Greece can return to the financial markets as early as 2014 and its debt will need a further «haircut» to become manageable, the Greek parliament’s budget office said on Wednesday.
Greece has been shut out from the debt markets since 2010 and its economy has been kept afloat solely by a multi-billion bailout package from the European Union and International Monetary Fund.
Under its latest bailout programme, Athens will be financed until the second half of 2014 and Greece says it hopes to return to bond markets then after achieving a primary budget surplus this year.
But parliament’s budget office, whose role is largely advisory and whose opinion is not binding, said the country would not be in a position to cover its needs without external help and its debt would not be viable by 2020 or 2022 without a further debt restructuring.
According to the 2014 budget draft submitted to parliament this week, Greece’s debt will stand at 175.5 percent of gross domestic product (GDP) in 2013. Greece and its lenders hope to bring debt down to 124 percent of GDP in 2020 and 110 percent in 2022.
“It is an illusion to expect that the country will return to the markets after 2014 to cover its debt refinancing needs plus any one-off needs,» the professorial body said in a note.
“For the debt to become viable with our (Greece’s) efforts alone, a combination of growth rates and primary surpluses for many years is required, and it is not realistic to assume this will be achieved.”
Greece’s euro zone lenders have ruled out an outright second debt writedown but attaining a primary surplus – which excludes debt servicing costs – would make Athens eligible for further debt relief from its lenders.
Greece says it could reduce its debt burden by other means, including an extension of maturities and lower interest rates on bailout loans. It also expects to receive a third bailout of about 10 billion euros ($14 billion) to get through next year.
“Based on our assessment, the debt relief measures are necessary but not sufficient for a permanent solution to the problem and leave Greece exposed to disruptions in the global and European economy,» it said.