Ljubljana, 27 June (STA) - Economist Mojmir Mrak has told the STA that there can be no sustainable solution to the Greek crisis without a restructuring and a partial writing off of the country's debt. All other proposals simply mean delaying the final solution and are involving increasing exposure on the part of European taxpayers.
A professor of the Ljubljana Faculty of Economics and one of the most acclaimed Slovenian economists, Mrak does not feel that additional aid promised by EU leaders in case of expansive privatisation and austerity measures will suffice to solve the Greek debt crisis.
Additional aid would mean buying a few extra months only to have to be supplemented in a not-too-remote future with a much more radical decision, Mrak noted.
According to Mrak, this final decision will have to involve debt restructuring, including with a partial debt write-off, since Greece is simply no longer capable of servicing its mountain of debt.
Mrak said that Greece's problem is not liquidity but insolvency and that experience has shown that such problems are resolved with partial debt write-offs.
A failure to apply this to Greece will mean that, struggling with a weak economy, Greece will not be able to breathe normally. The final decision will be delayed and the only thing changing will be the structure of the debt, with European taxpayers taking over more and more of the exposure.
He singled out as an interesting example the so called Brady debt relief plan used at end of the 1980s for Latin American countries. A combination of debt refinancing and partial write-offs, it allowed creditors to exchange their claims for tradable bonds that involved different forms of guarantees.
Mrak feels that the started debate on "voluntary and informal" participation of commercial creditors in additional aid to Greece via the exchange of due bonds with new instruments with longer maturity are already the start of this process, although the European Central Bank might be avoiding the term debt restructuring.
According to Mrak, Greece will do everything to avoid an uncontrolled, one-sided default, which would be extremely painful for the country. The other path is controlled default, coordinated with eurozone partners.
"But these possibilities are all more or less bad. There is no good solution," Mrak believes.