Conditions for a debt haircut

A growing number of European Union leaders and officials are now suggesting that next year will most probably see a significant write-down on Greek debt.

The country’s partners are clearly aware of the magnitude of the government’s, as well as of the people’s, mammoth efforts to dig themselves out of the brutal debt crisis.

They also understand the need for a new positive shock as Greece tries to kick-start its ailing economy, currently in its sixth year of recession.

That said, a decision by our foreign lenders on a fresh haircut will only come after Greece has managed to ensure stability and convince its peers in the euro area that it is serious about keeping on the path of fiscal discipline. All that, of course, must be achieved by creating a genuine – as opposed to an artificial – budget surplus.

Only after Greece has met the above conditions will the country’s debt become serviceable and therefore allow the national economy to turn around and walk a new, more optimistic path.