Much is being said about this, over and again.
Private bondholders have already received a haircut, and there is no rationale for official creditors (European partners and the IMF) to annul part of their claim as long as they provide for Greece's financing need in full. Financing under the current program lasts until 2016, although euro member states have pledged support longer if needed. The discussion about debt relief will only become ripe once Greece prepares for its re-entry into international financial markets. In addition to a sustainable debt ratio, investors likely require (i) solid economic growth; (ii) a revival of employment; and (iii) a healthy primary budget surplus. While the IMF projects these conditions to be in place from 2016, no market funding is penciled in at least until 2018 (the last year shown in the IMF's tables). At that point, financing requirements--at below EUR10 billion per year or around 5 percent--are small and the debt ratio declines sharply. Under such a positive scenario, official lenders may well provide a couple of years additional funding to further groom Greece's fundamentals before accessing markets--without debt relief.
However, the Eurogroup also committed to provide relief to Greece to ensure that its public debt is 124 percent of GDP in 2020 and substantially below 110 percent in 2022. This matches current long term forecasts by IMF and the European Commission. However, the IMF acknowledges that the underlying assumptions, such as a sustained primary budget surplus of 4 percent, are "ambitious". The EC's negative shock scenario (which may be more realistic than their "ambitious" baseline) estimates debt at about 140 percent of GDP in 2022, suggesting that debt would need to be reduced by some 30 percent of GDP (estimated EUR70 billion). However, while European politicians may by then have forgotten the commitment of their predecessors, markets may have grown accustomed to debt ratios well above 110 percent, such as in Ireland and Portugal.
There is no reason to expect a haircut to official creditors now. There may not be one altogether.
