Expectations for the necessity of a Greek sovereign debt restructuring have surged after German officials warned that the country is unlikely to survive the summer without doing so, according to Reuters. High-ranking sources within the German government said that despite the €110 billion bailout from the European Union and International Monetary Fund, “Decisive voices within the federal government expect that Greece will not make it through the summer without a restructuring.” The increased pressure on debt-burdened nations led Andrew Lynch of Schroders to warn, “You may see some countries deciding to leave the euro because they can’t deal with the fiscal straightjacket that it imposes on them.”
The Greek government spokesman insisted on Monday that the country’s leaders “fully rule out” a restructuring plan, even as its debt burden is expected to expand to 160% of gross domestic product by 2013. According to The Wall Street Journal, the Bank of Greece’s Governor, George Provopoulos said that a debt restructuring “is neither necessary or desirable,” warning, “It would have disastrous consequences,” for both the government and private investors. Provopoulos also confirmed the central bank’s previous forecast for a 3% economic contraction during 2011.
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