Whereas the economic program that Greece agreed with its European partners foresaw a mild contraction this year of 0.3 per cent of gross domestic product, followed by three years of steady growth in 2011, 2012 and 2013, the IMF-influenced plan sweeps aside such forecasts as far too rosy.
It envisages a 4 per cent slump in GDP this year, a 2.6 per cent drop in 2011 and a return to modest growth of 1.1 per cent in 2012. Similarly, the old plan was founded on the assumption that Greece could slash its budget deficit to less than 3 per cent of GDP by the end of 2012, from an estimated 12.7 per cent in 2009.
Reflecting its harsher growth forecasts, the IMF-eurozone plan abandons the 2012 target date for budget consolidation and sets 2014 as the year for Greece to bring its deficit below 3 per cent.
By the time the goals of the IMF/EU plan are realized Greece's external debt to GDP could easily be in the 150% to 170% range, up from 126% today. As I much as I support the austerity measures and reigning in Greece's corruption and out of control suite of entitlements, I think the steps being imposed by the IMF will leave little room for anything other than default.
I firmly believe others anticipate a similar outcome but the world's market are not ready to hear this ugly truth. The current steps are to calm kittery markets, reduce rates and minimize risk of contagion; default is very much on the table.
This underscores that if we continue to overlook or somehow rationalize political and economic pathologies, we will be faced with other sovereign bankruptcies.
Is Greek Debt Restructuring Next? [View article]
Whereas the economic program that Greece agreed with its European partners foresaw a mild contraction this year of 0.3 per cent of gross domestic product, followed by three years of steady growth in 2011, 2012 and 2013, the IMF-influenced plan sweeps aside such forecasts as far too rosy.
It envisages a 4 per cent slump in GDP this year, a 2.6 per cent drop in 2011 and a return to modest growth of 1.1 per cent in 2012. Similarly, the old plan was founded on the assumption that Greece could slash its budget deficit to less than 3 per cent of GDP by the end of 2012, from an estimated 12.7 per cent in 2009.
Reflecting its harsher growth forecasts, the IMF-eurozone plan abandons the 2012 target date for budget consolidation and sets 2014 as the year for Greece to bring its deficit below 3 per cent.
By the time the goals of the IMF/EU plan are realized Greece's external debt to GDP could easily be in the 150% to 170% range, up from 126% today. As I much as I support the austerity measures and reigning in Greece's corruption and out of control suite of entitlements, I think the steps being imposed by the IMF will leave little room for anything other than default.
I firmly believe others anticipate a similar outcome but the world's market are not ready to hear this ugly truth. The current steps are to calm kittery markets, reduce rates and minimize risk of contagion; default is very much on the table.
This underscores that if we continue to overlook or somehow rationalize political and economic pathologies, we will be faced with other sovereign bankruptcies.