Dimitrios Tsomocos, Universität Oxford, Debt, Recovery Rates and the Greek Dilemma

Most discussion of the Greek debt overhang has focussed on the implications for Greece, implicitly assuming a zero-sum game whereby any benefit to Greece from debt forgiveness implies an equal and opposite cost to the (German) creditor. If, however, the additional funds released to the debtor (Greece) are used efficiently in pursuit of a practicable business plan, then both debtor and creditor can benefit, in terms of higher net present value, from debt forgiveness, as we demonstrate in this paper.

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