Volunteers wanted Greece’s creditors would all have to take a massive hit to right its finances

The International Monetary Fund’s most recent review of the Greek economy, in December, gives an indication of the scale of the pain that these creditors need to take. Even if almost all of Greece’s private creditors agreed to write off half of what they are owed, its debt would still be about 120% of GDP by 2020. More likely, participation in any write-off would be lower than that, leaving debt above 145% of GDP in 2020. That implies another debt restructuring would be needed after this one. And since Greece’s economic news has been worse than expected of late, even these numbers are optimistic.

Talks between Greece and its private creditors were still under way when The Economist went to press, but the risks of a disorderly default are mounting. Europe’s earlier refusal to countenance default gave some lucky bondholders a year in which they could get repaid in full with loans granted by official creditors. The European Central Bank (ECB) is now thought to be Greece’s biggest bondholder.

Since official creditors are excluded from PSI, the remaining private creditors must suffer ever greater losses. Fund managers involved in the talks say that the reduction in the net present value of the bonds may be much higher than that suggested by a 50% reduction in their face value: the true figure could be closer to 70%. Read more at the Economist