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Dallara Says Growth Essential To Avoid Greek Debt Trap

Charles Dallara

Greece should be given much more time to meet its budget targets, and its official creditors should provide better terms on their loans if the country hopes to escape its debt trap, the head of an international lobby group for banks said Tuesday.
Speaking in the Greek capital, Charles Dallara, managing director of the Institute of International Finance, a group representing more than 400 of the world’s leading banks, said the solution to Greece’s debt problems depended entirely on returning the country’s recession-ravaged economy to growth.
In the speech, he criticized the excessive austerity policies that have sent the Greek economy into a five-year-long tail spin, reduced gross domestic product by a fifth and, in the process, rapidly worsened the country’s debt dynamics.
“Without a stabilization of the economy and a renewal of growth, debt sustainability will never be achieved,” Mr. Dallara said.
Despite an unprecedented 200 billion euro ($254 billion) Greek debt restructuring earlier this year–which Mr. Dallara helped negotiate–Greece’s debt is seen at close to 180% of annual economic output this year and is still rising.
Mr. Dallara signalled lower interest rates on that official debt, and maybe giving Athens a longer period to pay it off, were steps in the right direction. A debt buyback plan, he said, also merited attention, but he ruled out a debt writedown as being politically unpalatable.
(source: Dow Jones)

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