When will Greece be at default?: A short economic and political approach

Greek debt, standing (in 2009) at 129% of the country’s Gross Domestic Product (GDP), was clearly “unsustainable”. With this in mind, Greece was bailed-out twice for €110bn in 2010 and then again for €109bn in 2011. Greece negotiated, in February 2012, a new €130bn rescue package involving a voluntary haircut of some 53.5% on the face value of its bonds held by the private sector. Eurozone ministers agreed, in November 2012, to cut Greece’s debt by a further €40bn. Three years later, Greek debt has risen further to 175% of the country’s GDP bringing into the picture an increasing talk of a Greek default.
Leonidas Stergiou (Financial Editor, The Kathimerini newspaper) notes that whether (or not) Greece defaults in 2015 depends on how one actually defines the concept of default. Costas Milas (Professor of Finance at Liverpool University) and Gabriella Legrenzi (Senior Lecturer in Economics at Keele University) discuss some of the “sticky points” of the current standoff between Greece and the institutions (Greece’s lenders) and put forward an economic proposal which might go some way towards resolving this very standoff.