The growth impact of debt restructuring and the resulting reduction in its servicing costs will be higher if the fiscal space created by the lowering of fiscal targets, amounting to 1.5% of GDP, is used to reduce labour and capital taxation and is accompanied by appropriate policies to increase potential output and bring about a reversal of the brain drain, i.e.
a repatriation of young graduates and professionals who left the country during the crisis. This mild debt reprofiling proposal is vital for Greece and entails only a negligible cost for its partners. This will pave the way to the inclusion of Greek government bonds in the ECB’s quantitative easing programme, which in turn will facilitate sustainable market access and further support the economic recovery.