School of Transnational Governance

The State of the Union Experts: Greece Debt Sustainability is an EU Priority

The event 'Putting the Greek Debt Problem to Rest' took place in the margins of the eighth edition of the high-level annual conference organised by the EUI to foster reflection on the most pressing issues for Europe.

‘Our first statement is indisputable: even under optimistic assumptions, Greece’s debt, as it is today, is not sustainable’ said Jeromin Zettelmeyer, Senior Fellow at the Peterson Institute for International Economics, during the event organised by the School of Transnational Governance for The State of the Union.

Speaking in front of the audience gathered in Sala Lorenzo il Magnifico, at Palazzo Vecchio, he claimed that ‘not even the measures proposed by the Eurogroup would be enough to make Greek debt sustainable’. ‘They might work – he added – but at a high price: without some measure of face value debt relief, Greece would still be repaying its creditors well into the 21st Century’. Zettelmeyer, together with STG’s director Miguel Poiares Maduro and Prof. Richard Portes of London Business School, were presenting these findings as co-authors of an independent report on Greece’s debt published by the Centre for Economic and Policy Research (CEPR).

During the event, the speakers made a strong case for the necessity of face value debt reduction: failing to take this measure would imply ‘putting an enormous weight on the shoulders of future generations, which seemed absurd – that is the reason why we came up with our proposition’, explained Zettelmeyer.

The main contribution of the report, according to the authors, was to identify a way to implement face value debt reduction in full compliance of the EU law provisions: ‘Article 125 does not rule out the possibility of financial assistance between member states’, said Prof. Miguel Maduro, addressing the legal aspects of the policy proposal: ‘on the contrary, it would be perfectly in line with the principle of solidarity between member States’.
Answering to a question from Ferdinando Giugliano, Bloomberg Economics columnist, Zettelmeyer warned against Europe’s ‘wait-and-see strategy: the Eurogroup has to take action with face value debt reduction right now’, he said.