National debt of Greece: high, but manageable (!?)

In its analysis yesterday, the Greek Fiscal Council (ΕΔΣ) characterizes debt as manageable in the medium to long term, despite a significant increase in the ratio of public debt to GDP.

In fact, the Fiscal Council estimates that gross financing needs for the next decade are projected to remain below 15% of GDP, while it estimates that by the end of the first quarter of 2022, Greek securities will be rated in the investment rating, which allows the use of them under the regular quantitative easing program of the European Central Bank (ECB).

The board notes that the debt remains manageable due to a number of factors. Prior to the crisis, the positive macroeconomic and fiscal performance recorded by the Greek economy, combined with the completion of short and medium term debt relief measures, created an enabling environment for its management.

At the same time, the management strategy was successfully implemented, which included, among other things, normalizing the redemption profile of government bonds and creating significant monetary security (reaching 38.6 billion euros), which strengthened the confidence of international investors.

According to the Council’s analysis, the decisive factor in the coming years is expected to be the impact on the development of resources that will be directed to the economy, mainly within the framework of the multi-year financial program for 2021-2027 (estimated at about 19 billion euros), since the Recovery Fund ( 30.5 billion euros) will help reduce the ratio of debt to GDP due to its growth.

In such an environment, ΕΔΣ argues that the current composition of Greek debt, the level of gross financial needs and the maintenance of a relaxed monetary policy by the ECB could largely ensure smooth management of Greek debt and a trend towards a strong de-escalation of the public debt to GDP ratio after 2021.

Specifically, with regard to the overall funding requirements, ΕΔΣ notes that in terms of depreciation, they will not exceed € 11.5 billion by 2070. Thus, with the help of a favorable interest rate environment, the overall financial needs for the next 10 years will remain below 15%. GDP.

Editors’ note: how correct these figures are, perhaps only the Bank of Greece and the Ministry of Finance know, and, perhaps, competent officials in the Prime Minister’s administration. Nevertheless, Greece’s national debt has grown and is more than it was in 2008, when it amounted to 389,431 billion US dollars or 109.4% of GDP. According to the publication, at the beginning of June 2021 he is USD 441.8 billion or 210.52% of GDP (and this is despite the fact that from 2012 to 2018 there were written offs debts in excess of $ 100 billion). In fact, over the past years, Greece has spent another 152 billion US dollars, while more than 80% of state-owned enterprises were privatized, and the country’s GDP fell by 46.11% (389.43 in 2008 – 209.86 in 2021).

This means that at the moment, every resident of Greece (as of June 1, 2021, it is 10,364,074 people) has a public debt in the amount of 42,628 US dollars and, judging by statistics, it will continue to grow.

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