Blog post

Actual and cosmetic changes in debt sustainability

The leaked Debt Sustainability Analysis (DSA) produced by the IMF in February 2012 looked into the economic developments that would arise in Greece

Publishing date
15 March 2012
Silvia Merler

The leaked Debt Sustainability Analysis (DSA) produced by the IMF in February 2012 looked into the economic developments that would arise in Greece following two different scenarios, a baseline and an alternative scenario.  A revised version of the DSA was leaked on March 11th, incorporating the recent agreement reached on Private Sector Involvement (PSI) and Official Sector Involvement (OSI).

In February 2012, the IMF forecasted that according to the baseline scenario, debt would decline to 129% of GDP by 2020 and suggested there was a need for additional debt relief from the official or private sectors to meet the objective of 120 % of GDP by 2020.  Taking into account the conditions on private and official sector involvement agreed upon by the Eurogroup on February 21st and the outcome of the debt exchange of early March, the IMF updated its assessment. Its results show that under the baseline scenario debt would decline to below 117% of GDP by 2020, reaching 90% of GDP by 2030.

The baseline scenario assumes favourable economic conditions, whereas the alternative scenario considers the effects of an adverse outlook. In the latter scenario, the debt trajectory is much higher, with debt reaching 169 % of GDP in 2020, according to February estimates, and 145 % of GDP, according to the March report.

The figure below shows the two sets of projections for the baseline scenario:


*The February 2012 figure includes debt for collateral requirements, while the one for March  does not specify whether these requirements are included in the computations

** The February 2012 figure for 2011 debt is a projection, whereas the March 2012 figure is an actual value

The following figures look at debt developments taking into account different primary balance (PB) trajectories:


About the authors

  • Silvia Merler

    Silvia Merler, an Italian citizen, is the Head of ESG and Policy Research at Algebris Investments.

    She joined Bruegel as Affiliate fellow at Bruegel in August 2013. Her main research interests include international macro and financial economics, central banking and EU institutions and policy making.

    Before joining Bruegel, she worked as Economic Analyst in DG Economic and Financial Affairs of the European Commission (ECFIN). There she focused on macro-financial stability as well as financial assistance and stability mechanisms, in particular on the European Stability Mechanism (ESM), providing supportive analysis for the policy negotiations.


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