Reuters on Wednesday quoted a "confidential paper" prepared by European Stability Mechanism (ESM) as advising that bailout-dependent Greece will not need debt relief by European creditors if the country posts primary budget surpluses above 3 percent for 20 years.
The purported leak from the Euro zone's bailout fund comes amid the ongoing impasse in the Greek program from standing disagreements between the IMF and European creditors, primarily Germany, over the issue of debt relief for the bailout-dependent country.
The article, bylined by Gernot Heller in Berlin, states that the paper was composed for EZ finance ministers and the IMF ahead of a Eurogroup meeting last Monday, which had been forecast to conclude with an agreement over the Greek bailout. However, nothing concrete was decided.
According to Reuters, the fanciful "scenario A" assumes no debt relief will be needed if Athens keeps primary surplus at or above 3.5 percent of GDP until 2032 and above 3 percent until 2038.
In trying to disprove the unprecedented nature of such a prospect, the ECB, pointed to two Scandinavian models from past decades: Nokia-led Finland -- which posted a primary surplus of 5.7 percent over 11 years between 1998-2008 -- as well as Denmark between 1983-2008.
"Scenario B" assumes recession-battered Greece is extended the "maximum possible debt" relief under a May 2016 agreement.
Scenario A assumes average annual economic growth in Greece of 1.3 percent during the forecast period.
The IMF believes such economic growth and primary surplus assumptions are unrealistic in the case of Greece where policy-making institutions are weak and productivity is low.
