2016年-PIIE彼得森国际经济研究所_Sustainability_of_Greek_Public_Debt_17页_310kb

Summary of the Sustainability of Greek Public Debt

Core Content

This policy brief by William R. Cline analyzes the sustainability of Greek public debt following the July 2011 support package. The focus is on four key indicators: gross debt to GDP, net debt to GDP, net interest payments to GDP, and amortization of medium- and long-term debt to GDP. The analysis suggests that the new arrangements significantly improve Greece's debt sustainability compared to the pre-package scenario.

Main Points

• Gross Debt to GDP: The gross debt ratio peaks at 175% in 2012 and declines to 113% by 2020.
• Net Debt to GDP: Net debt falls from 121% in 2011 to 69% by 2020, aligning with the U.S. net debt to GDP ratio in 2011.
• Interest Payments to GDP: The interest burden decreases from 7.2% in 2011 to 5.2% by 2020.
• Amortization to GDP: Amortization drops from 12% in 2011 to 0.5% by 2020, indicating a major reduction in short-term debt repayments.
• Primary Surplus to GDP: The primary surplus rises from -0.8% in 2011 to +6.4% by 2014 and remains at that level thereafter.
• Real Growth: Real growth is projected to rise from -3.8% in 2011 to 3% by 2020, with a more optimistic path in the central case.

Key Measures and Outcomes

• Private-Sector Involvement (PSI): The PSI is a central part of the package, reducing amortization to private holders by €135 billion over 2011–20. It also helps avoid high interest rates by converting existing debt into 30-year bonds.
• EU Support: The support from the EU includes 10-year grace periods and lower interest rates (around 3.5% instead of 5–7% previously), which reduces the interest burden and alleviates liquidity issues.
• Assets and Net Debt: The increase in public assets (up to €150 billion by 2015) significantly lowers the net debt to GDP ratio, as assets are deducted in the net debt calculation.
• Fiscal Adjustment: A sustained primary fiscal surplus of about 6% of GDP is critical for long-term sustainability. If Greece only achieves 3%, the net debt to GDP ratio will plateau at around 95% by 2015.

Debt Composition

• Public Debt Holders: About 50.3% of Greece's public debt is held by the official sector (IMF, EU, EFSF), with the rest held by private entities, including Greek banks.
• PSI and Buybacks: The PSI is expected to reduce debt by €135 billion, and buybacks are estimated to occur at 61% of face value, helping to reduce the debt burden.

Simulation Results

Policy Implications

• The new support package, including the PSI and lower interest rates, is expected to make Greece's public debt more sustainable.
• The net debt to GDP ratio is a more accurate indicator of sustainability than the gross debt ratio.
• The primary surplus must be maintained at a high level (around 6% of GDP) for long-term solvency.
• Privatization and asset accumulation are important factors in reducing the net debt burden.
• The success of the PSI and buybacks is crucial in preventing a liquidity crisis and reducing the interest burden.
• If the PSI is not fully implemented, the debt burden could remain high, and the net debt to GDP ratio could plateau at around 95% by 2015.

Alternative Scenarios

• No PSI/BB: Without PSI and buybacks, the debt burden remains higher, with net debt reaching 81% by 2020.
• Half PSI, same BB: This scenario results in a modestly higher net debt and interest burden, but still significantly better than the pre-package baseline.
• Half PSI, more BB: This case leads to the lowest debt ratios and interest burden, but still faces some amortization pressure.
• PS4.5: If Greece fails to meet the primary surplus target of 6.4%, the net debt ratio stabilizes at 95% by 2020, and the interest burden is higher than the central case.

Sensitivity Analysis

• High Growth (HG): Increases real GDP growth by 1 percentage point annually, leading to a faster decline in debt ratios.
• Low Growth (LG): Slows growth by 1 percentage point annually, leading to higher net debt and interest burden.
• High Primary Surplus (HPS): Boosts the primary surplus by 1% of GDP annually, having a similar effect on net debt as high growth.
• Low Primary Surplus (LPS): Reduces the primary surplus by 1% of GDP annually, leading to similar increases in interest burden as low growth.
• PS3: If the primary surplus is capped at 3% of GDP, the net debt ratio stabilizes at around 95% by 2015 and the interest burden rises to 6.75% by 2020.

Conclusion

The July 2011 support package is expected to significantly improve Greece's debt sustainability, provided the fiscal targets are met. The PSI and EU support with lower interest rates and extended maturities are key to this improvement. While the gross debt to GDP ratio remains high, the net debt ratio is more manageable and comparable to other G-7 countries. The success of the package depends heavily on Greece's ability to achieve the necessary fiscal adjustments and maintain a strong primary surplus.