Greece’s debt can now only be made sustainable through debt relief measures that go far beyond what Europe has been willing to consider so far. ... Greece cannot return to markets anytime soon at interest rates that it can afford from a medium-term perspective. ... Greece is expected to maintain primary surpluses for the next several decades of 3.5 percent of GDP. Few countries have managed to do so. ... Greece is still assumed to go from the lowest to among the highest productivity growth and labor force participation rates in the euro area, which will require very ambitious and steadfast reforms. ... [G]overnance issues ... are at the root of the problems of the Greek banking system. There are at this stage no concrete plans in this regard. ... The dramatic deterioration in debt sustainability points to the need for debt relief on a scale that would need to go well beyond what has been under consideration to date—and what has been proposed by the ESM. There are several options ... maturity extension ... of, say, 30 years on the entire stock of European debt, including new assistance. ... Other options include explicit annual transfers to the Greek budget or deep upfront haircuts. The choice between the various options is for Greece and its European partners to decide [i.e. not the IMF].
