Saving the euro: Three steps towards an orderly default

SAVING THE EURO

Schroders' economists Keith Wade and Azad Zangana highlight three steps needed for Greece to default in a manner which does not damage confidence and markets.

1. Debt Restructure The first step is the recognition Greek debt needs to be restructured and managed in an orderly way. It is inevitable, according to the economists, Greek bondholders will have to take a loss and some banks will have to be recapitalised. “For Greece to return to a more sustainable footing, 50% haircuts are widely seen as the minimum required by investors, which would take projected debt from 160% of GDP to 80% of GDP, a similar level to that held in core Europe,” they said. A 50% haircut translates to total losses of €175bn, but European Banking Authority stress t...