Financial Times
July 13, 2011
The endgame for Greece is approaching. Eurozone policymakers appear to accept that the country is insolvent. That comes a bit late, but not too late. The eurozone now faces two formidable tasks: to quarantine Greece, and to fortify the bloc’s core, especially Italy, to reduce the risk of contagion. These require policymakers to be brave enough to make some tough choices.
How insolvent is Greece? Barclays Capital estimates that Athens would need to run a primary surplus of 7.4 per cent of gross domestic product by 2015 to restore debt sustainability, but that the maximum achievable economically and politically is 2.5 per cent. On the latter assumption, absent a restructuring, Greece’s debt to GDP ratio could reach more than 400 per cent by 2050.
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