If Eurogroup meetings fail, is a Greek default inevitable? - Sam Bowman leans YES in CityAM

Deputy Director of the Adam Smith Institute Sam Bowman took part in the CityAM debate, arguing that failed Eurogroup meetings would make a Greek default more likely:

No country has pulled back from a peacetime debt-to-GDP ratio as high as Greece’s 175 per cent without defaulting. Its options are to grow out of debt, default unilaterally, or restructure its debt in cooperation with the Eurogroup. With the last of these off the cards, it may push for growth. But the country is in a state of near-perpetual deflation, which means that, even if it did have growth, it would still not be enough to boost its nominal GDP growth to the 4.9 per cent the Eurogroup believes is needed to start paying down its debts. Big supply-side liberalisations seem unlikely under Syriza, and certainly not on the scale necessary to deliver the growth a deflationary Greece would need to change its borrowing trajectory. However, absent debt servicing costs, it is running a budget surplus. If it defaulted, it may not need to worry about borrowing for now. If debt restructuring is truly off the table, a unilateral default may look very tempting.

Read the full debate here.