«(…) we decided to assume that the (grossly unrealistic) targets set by the EU and the Greek government will be met well and truly. Imagine our surprise when we discovered that, even under these official science-fiction-like presumptions, Greece’s debt-to-GDP ratio path remains explosive. Indeed, and this is crucial, the aggressive privatisation drive would make no difference to the probability of default.
Scenario 1 (the grey bars): Steady as she goes, with strict adherence to the EU-IMF targets (…)
Scenario 4 (the pink bars): The Modest Proposal fully fledged. Policy 3 is also activated with the European Investment Bank carrying out investments within Greece to the tune of 0,9% of Greek GDP (…)
Indeed, only the fully-fledged Modest Proposal (see Scenario 4) has the capacity to diffuse the problem, and push Greece’s debt-to-GDP ratio into a sustainable path.
This is where the Modest Proposal comes in: For it allows Europe to forge enough common ground to stop the crisis on its tracks without requiring of our fragmented political system to generate a federal push that it is incapable of.(…)
Martin Wolf, Paul Krugman, as well as a number of the brightest Central Bankers on the continent, have argued, correctly, that a Greek default is both inevitable (under the present mix of policies) and catastrophic for the eurozone as a whole.» – Yanis Varoufakis