Clearly the lower surpluses imply a smaller fall in the debt-to-GDP ratio and higher gross financing needs. However, the smoothing of interest can mimic the baseline high surplus case both on the path of the debt-to-GDP ratio and in terms of gross financing needs.
On the basis of the definition of sustainability agreed by the Eurogroup, the debt is sustainable since gross financing needs remain under 15 per cent of GDP in the medium term and under 20 per cent in the long term. This exercise is indicative of how even a mild debt relief can have significant effects on the debt profile.