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A significant 50% haircut on Greek debt would not solve the problem of Greece, as clearly stated by the Institute of Economic and Industrial Research. The General Manager of the Institute, Yiannis Stournaras, stresses that such a drastic reduction in the value of Greek government bonds would hit local banks the hardest. They would need major recapitalization that is difficult to obtain through an increase in equity capital. Another alternative would be the nationalization of the local banking system, which would completely block the liquidity of the domestic market.

"The foreign debt haircut will not result in anything but a dangerous precedent," insists Stournaras. He stresses that it would only plunge Greece into an even deeper crisis and would take it far away from capital markets. The issue has split the international economic community into two camps. European leaders insist on relieving Greece significantly of the debt burden at the expense of private pension funds and banks, because they think the country is not able to cope simultaneously with reforms and repayment of old debts. The International Banking Institute (IIF), in turn, calls upon Athens to stick to its promises of 21 July this year and to act in parallel with fiscal consolidation and meet its debt obligations. The only curtsey the international banks are willing to do for now is the 21% reduction, which unfortunately will not have a serious impact on relieving indebted Greece.

Yiannis Stournaras repeated once again the well-known truth that the country would not stand up if it does not begin to produce primary budget surpluses. Greek bankers agree with him. They note that what is most lacking today is political will to implement the agreements of July 21. Banking players insist that the embrace of the state will have a negative effect on the economy and will destroy the property of thousands of small shareholders.

The Institute of Economic and Industrial Research suggests that the government pulls itself together quickly and through effective action returns, by 2020, the primary budget surpluses of 4% of GDP, known since the early 1990s, to regain in parallel 4% economic growth, and the percentage of loans in the future should not exceed 4%. Moreover, public assets of €50 billion should be privatized and exploited, following the decisions made in the middle of the year.

All this sounds wonderful, but obviously, it cannot be achieved within the desired time frame, as the past two years have proved. Foreign investors, who fear that a partial remission of the debt (haircut 50% off) will be borne only by private owners of Greek government bonds and not by institutional owners, such as the International Monetary Fund, the European Central Bank and the Member-States, support this view. In an interview with CNBC, an economist at the Swiss bank UBS, Stephane Deo, made an extreme proposal to write off Greek debt completely. He said that different haircuts would not work because one third of the debt belongs to the Troika due to the bailout. A 50% remission would have a real effect because the affected financial institutions would need recapitalization and the real effect would be only 20%. "Greece has to fail one way or another," concluded the financier, "because it isn't effectively coping with the reduction of budget deficit and with other problems like other countries such as Ireland and Portugal.

While the dialogue in the international public space is ongoing, Greece is continuing to increase its obligations in order to maintain its economy. This week, the Public Debt Management Agency once again issued  3-month government bonds, which recorded a new high interest rate. The sum of € 1,625,000, which the Greek Ministry of Finance managed to gain, was consistent with the objectives of the Ministry, but the interest rate jumped again to 4.61%.from 4.56% last month for the same securities.