Tuesday, 25 October 2011

Reality strikes the EU at last?

Paul Mason's Twitter feed, Friday 21st October 2011

I am tweeting a series of quotes from the Troika Debt Sustainability Assessment. They say Greek debt peaks at 186% of GDP evn with 21 J deal

Troika report basically says current Greek debt dynamic entirely reliant on massive haircut AND total support from EU/IMF

Troika: "Making Greek debt sustainable requires an appropriate combination of new official support on generous terms and additional debt relief from private creditors

The Trokia's logic is to say: without help Greece gonna need E359bn bailout. With 50% haircut it needs E220bn - from p7 of Troika doc

Troika; however they also moot a 60% haircut - this brings official financing down to 216bn

OK to recap. Some insiders now saying my doc is not Troika but ECB+. However: debt dynamics only sustanable with haircut + further bailout.

Okay - now I have gotten thru the basics of the doc I will analyse and do an orderly twitter splurge. From 1 to 10

1) A debt analysis sent out to EU leaders says Greece may need 50-60% debt forgiveness (ie haircut) to maintain bailout as agreed...

2) Even with 50% haircut on Greek debt, says the doc, Greece going to need bigger bailout

3) It says debt to GDP could peak at 186% without a massive haircut, and remain unsustainable for a decade

4) It also models a very deep, frontloaded adjustment, with slump plus low privatisation receipts

5) Greece "a turn for the worse, with the economy adjusting through recession + related wage-price channels, rthr thn structural reform"

6) "Even with much stronger PSI, large official sector support would be needed for an extended period."

7) Some are saying this is a "positioning document" pinged late Friday into EU inboxes to freak them out. I would not know

8) It certainly places 50-60% haircut on agenda. That then impacts on bank solvency in N Europe

9) Bleakest part of DSA is its view that Greek economy is not undergoing structural impovement, just internal collapse

10) Hard to see the story standing up that Greece can grow its way out with 21% haircut, if this assessment is accepted.

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