Adjust and Reschedule or Delay and Default
Unless Greece reschedules its massive debt, it is unlikely to be able to roll over the approximately €30 billion maturing annually for the next few years. But if Greece reschedules its debt in the absence of a credible fiscal-adjustment program, financial markets would view the delay as merely a prelude to eventual default, which would drive the risk premium on Greek debt even higher.
BRUSSELS – As Greece activates its €45 billion rescue package with the International Monetary Fund and the European Union, it is becoming clear that a new, far more comprehensive approach is needed. Two problems need to be addressed: the credibility of Greece’s fiscal stabilization program, and how to cover the country’s medium-term financing gap.