Greece’s Debt: Sustainable? Harvard Case Solution & Analysis

The case "Greece's Debt: Sustainable?" describes the Greek economic crisis, bailout from the European Unionand also the International Monetary Fund (IMF), as well as the debt restructuring that followed. Due to a lack of trust in the ability to settle its debt in Greece, two programs were coordinated that provided financial assistance to Greece. This was followed by a debt restructuring that provided debt relief through a blend of lowering interest rates, lengthening debt maturity, and rebates on interest and principal to Greece. Its debt was reported in face value terms, according to the Maastricht treaty because Greece had not embraced accrual accounting.

This was in contradiction to bookkeeping practices that appointed reasonable valuation of debt consistent with present value techniques or market prices. The case ends using a number of questions that guide the conversation to the importance of accrual accounting and valuation of debt. Did Greece have too much debt and as a consequence a solvency problem? Should Greece drive lenders to take a haircut on the debt? Were the austerity measures really essential? Or did Greece have too little debt, so enabling the nation spark growth, increase spending, and to avoid austerity measures?

This is just an excerpt. This case is about FINANCE & ACCOUNTING



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