Greece’s Bogus Debt Deal
The process of official forgiveness of Greek debt has begun, with the debt/GDP ratio targeted at 124% in 2020, down from roughly 200% today. But the idea that there is a smooth transition path for the debt/GDP ratio is fanciful, and, even if the 124% target were reached on time, Greece's debt still would not be sustainable.
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PRINCETON – The process of official forgiveness of Greek debt has begun. Referred to as “official sector involvement” (OSI), it includes several initiatives aimed at reducing Greece’s debt/GDP ratio to 124% in 2020, from roughly 200% today. Even as the deal was announced, however, newspaper reports suggested that officials recognized that the measures would be insufficient to meet the target; further negotiations on additional steps would be needed at a politically more convenient moment.