Lazard Sees $113 Billion Greek Debt Cut as ‘Reasonable’

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Euro Store Fridge Magnets In Athens
Greece's public debt currently stands at more than 320 billion euros, or about 175 percent of GDP, making it Europe's most-indebted state when measured against output. Photographer: Kostas Tsironis/Bloomberg

Canceling 100 billion euros ($113 billion) of Greece’s debt would enable the country to cut the load in line with targets set by the international authorities that bailed out the nation, the country’s debt adviser, Lazard Ltd.’s Matthieu Pigasse, said in a radio interview Tuesday.

A debt-to-gross-domestic-product ratio of 120 percent in 2020 is “a target that looks reasonable to me and that effectively allows bringing Greece into a sustainable pattern,” Pigasse, who leads Lazard’s sovereign advisory team, said on France Inter radio. “An effort is absolutely necessary” and negotiations are ongoing, he said, speaking in French.

European leaders on Monday urged Greek Prime Minister Alexis Tsipras to pare back his ambitions for easing the financial pressure on his people, saying they would go against the conditions attached to the country’s bailout. Greece’s public debt currently stands at more than 320 billion euros, or about 175 percent of GDP, making it Europe’s most-indebted state when measured against output.

“It’s a negotiator’s position,” said Michel Martinez, an economist at Societe Generale SA in Paris. “A debt cut of this magnitude politically is very difficult, or even unacceptable. One should explain to German and French taxpayers that have lent to Greece that there will be losses,” Martinez said.

‘Humanitarian Crisis’

Canceling the debt isn’t the only option to reduce Greece’s debt-to-GDP ratio, and interest rate cuts and longer maturities are also possible, he said.

Debt can be canceled, or reduced, in several ways, Lazard’s Pigasse said, without elaborating.

“Greece is in a situation of financial distress, it knows a humanitarian crisis like Europe has not known since World War II,” Pigasse said. “The austerity cure that was imposed to Greece by what’s called the troika, which is the IMF, the European Central Bank and European states has led to a true disaster.”

Greek government bonds rose today after four days of declines. The yield on 10-year bonds fell 28.8 basis points to 10.5 percent. The Athens Stock Exchange Index rose 1.8 percent at 1:43 p.m.

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