Practical analysis for investment professionals
15 January 2015

Poll: What’s the Best Solution to the Greek Sovereign Debt Crisis?

Posted In: Economics

What’s the best solution to the Greek sovereign debt crisis?

When we posed that question to readers of CFA Institute Financial NewsBrief, the option that drew the highest proportion of votes (32%) from our 684 respondents is that Greece should Grexit, or exit the eurozone. Interestingly, the second most popular option — that Greece should formally declare default (25%) — is also a path to the Grexit. Only 17% voted for continuing with the bailout and austerity measures, the medicine applied by the European Central Bank (ECB), the European Commission, and the International Monetary Fund (IMF) since 2009. There is skepticism about whether more of the same can cure Greece’s debt problems.

But unlike our respondents, decision makers do not seem to support the Grexit. The leftist party Syriza, which is leading in the polls before the upcoming parliamentary elections on 25 January, is against austerity, which is blamed for unemployment topping 25%, but does not favor the Grexit.

What is the best solution for Greece in addressing its sovereign-debt crisis?
What is the best solution for Greece in addressing its sovereign-debt crisis?

Economists, unsurprisingly, are divided. Some argue that Greece staying in the eurozone is worse than Grexit; others say that Grexit could happen by accident. In Greece’s story of anti-austerity politics and unsustainable debt, the only certainty is that all options involve risks and reforms.

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

About the Author(s)
Usman Hayat, CFA

Usman Hayat writes about sustainable, responsible, and impact investing and Islamic finance. He is the lead author of "Environmental, Social, and Governance Issues in Investing: A Guide for Investment Professionals," and the literature review, "Islamic Finance: Ethics, Concepts, Practice." He is interested in online learning and has directed three e-courses for CFA Institute: "ESG-100," "Islamic Finance Quiz," and "Residual Income Equity Valuation." The other topics he writes about are macroeconomics and behavioral finance. Previously, he was a content director at CFA Institute. He is a former executive director at the Securities and Exchange Commission of Pakistan (SECP). He has experience working in securities regulation and as an independent consultant. His qualifications include the CFA charter, the FRM designation, an MBA, and an MA in Development Economics. His personal interests are reading and hiking.

5 thoughts on “Poll: What’s the Best Solution to the Greek Sovereign Debt Crisis?”

  1. Steven Parker says:

    The Greeks have never paid their sovereign debt. They need to be held accountable. A “Grexit” is one possible option. But, back in the 70’s the Latin American debt problems were fixed by exchanging debts with other countries with similar problems and then denominating the debt in the other country’s currency. That way both countries are incentivized and benefit from their efforts to solve their economic problems. It worked.

  2. Sam says:

    Greece owes about 357 billion dollars of debt to all outstanding creditors. The best solution would be for the EU central bank to buy all of Greece’s outstanding debt and convert the current balance to a one percent interest rate. Similar to what Alexander Hamilton proposed back in the day.

    The EU central bank would then set a Greek repayment plan so Greek debt to GDP would be reduced to under 10 percent in 30 years. The repayment plan would be a fixed amount.

    All further debt issued by Greece would be bought by the EU central bank at 1 percent. However, there are contingencies such as:
    * Greece is not allowed to sell debt on the open market;
    * restructuring progressive income tax (5/15/25/35);
    * Greece is not to expand its social insurance programs for the next 30 years;
    * The EU central bank has exclusive rights to be first buyer at 1 percent interest rates; and
    * Greece must consistently reduce its debt to GDP ratio every year (Greece should be left to devise how they do this).

  3. Nick Voutsas says:

    Greece needs a stimulous package rather than austerity linked to a European Union Fiscal governance system

  4. hmmmm. says:

    Greece is vehemently again austerity reform. Why is it then ok for someone who works to 67 before retiring be expected to subsidise someone who retires at 50 because that is what is allowed in greece. If the country cannot support people retiring at 50 then greece has to make the retirement age to be in line with the countries that are paying for their lifestyle. The PM can quaddle on about them being the inventors of democracy and they will sail out of this and threaten to resign if the country doesnt vote how he wants them to vote. From where I see the PM is not doing greece any favours he hasnt got a clue and the eu would be better off without them. The fact of the matter is greece is living beyond its means and expects other countries to constantly bail them I say if greece is not prepared to help itself then the eu is foolish to come to their aid AGAIN

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