Saxo Bank chief economist speaks on Greece’s eurozone position

Tuesday, 27 November 2012 15:43

The Eurozone finance ministers met on Monday to discuss the Greek debt problems. They convinced international creditors to send the next tranche of bailout money to Greece in the next few weeks. It has to come in time for the country to make its next debt payment.

“I mean part of the solution this time around will be that Greece is giving up to 10 billion euros to buy back some of their own debt and retire it. But you have to remember that itself is what we call in OSI a public sector involvement in this, which means that essentially we have started the process of taking haircuts on Greek debt so 120-122% of GDP doesn’t really matter, everybody knows that if your debt to GDP is higher than 90, you have a huge future tax on your growth and you have negative downside for years to come”, says Steen Jakobsen, Chief Economist at Saxo Bank in Copenhagen.

He also says there will be no win-win situation, someone will have to accept a loss.

“I would start negotiating who should take the losses here because we need to reduce Greek debt to GDP below 90% if we really want Greece to have a future both on its own but also certainly in part of the eurozone and Europe. So you need someone to take the loss. Of course the consequences of the loses will be that countries like Germany, Finland and the Netherlands will have to take these loses and absorb them into their fiscal deficit, something which is politically impossible to facilitate, certainly as 2013 is an election year in Germany. So whatever is the most rational, whatever is the best solution for Greece is and remains out of reach in terms of being a political solution.”


Courtesy of

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