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Greek Debt Buyback Falls Short Of Goal, Will Reduce Greek Debt/GDP Target Less Than Required

Reuters has disclosed the outcome of the Greek debt buyback, citing a Eurozone official, which while completed at €32 billion, has missed it hard goal by €450 million, and as a result the completely unbelievable Greek 2020 debt/GDP target will be 126.6% instead of 124%. Reuters also reports that the average price on the buyback was 33.5 cents on the euro. As a result of the higher price paid for the buyback, the outcome is that Greek debt/GDP will be reduced by 9.5%, or less than the 11% targeted. Earlier, it was also reported that with virtually all Greek banks having sold out of their Greek bond exposure, all Greek private debt is now in foreign hands. It is unclear how holdouts will be dealt with, and what, if any, rights they will have following the transaction. Finally, as to the 2020 debt/GDP target, one can only hope that the Greek GDP, which is a rather critical component of the debt/GDP calculation, will now rise in a straight diagonal line up and to the right as the Troika expects it to do. Sadly, it won’t.

From Reuters:

Greece’s debt buyback attracted bids totalling 31.8 billion euros, but the price paid for the bonds will not be sufficient to reduce the debt burden to 124 percent of GDP by 2020, a euro zone official familiar with the auction said.


The source said the average price was 33.5 cents on the euro, slightly above what was expected, meaning that there was a shortfall of about 450 million euros. Senior euro zone finance and treasury officials discussed the results on a conference call earlier on Tuesday.


The official said the operation was sufficient to reduce Greece’s debt-to-GDP ratio by 9.5 percentage points, below the originally targeted 11 percent.


That means that debt as a proportion of GDP will only fall to about 126.6 percent by 2020, above the goal agreed with the IMF of 124 percent.

As a reminder, this is what the trajectory of Greek GDP has to be in the next decade for the “target” to be hit:

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