This seems implausible, as it would trigger a major financial crisis, a risk that policy makers in Europe are certainly aware of. It can be discussed at length if it was a good idea to let one or another country in, but once officially a member and in a situation as frail as it is today, the decision becomes irreversible. At any rate, public debt troubles in Europe are quite complex and call for a global, permanent solution. According to the forecasts contained in the third review of Greece’s stand-by agreement with the IMF, from now to 2020 Greece must generate a primary fiscal surplus of 6% of GDP per year. Thus it could take its public debt from its present-day levels of around 1.5 times its GDP to 1.3 times. This is a major adjustment if we consider that in 2008 the country posted a primary deficit of 4.5% of GDP, all this under the assumption that it will pay an interest rate between 6 and 7%, and the interest rate is today around 16%. Certainly, if the rates don’t go down it will be hard for Greece to recover easy access to private credit markets, as hard as obtaining permanent funding by official agencies. From these crossroads, Greece will have to find new permanent solutions that allow it to return to fiscal solvency and distribute the losses without jeopardizing financial stability. Another complex aspect of the situation of developed economies is their weak recovery.
8  BIS central bankers’ speeches  Figure 5 Multilateral nominal exchange rate (1) (index, 2005=100) 140  140  130  130  120  120  110  110  100  100  90  90  80  80 00  01  02  03  U.S.  04  05  06  07  08  09  Commodity exporters (2)  10  11  Chile  (1) An increase indicates a depreciation of the local currency. (2) Simple average of Australia, New Zealand and Canada. Source: Bank for International Settlements (BIS). Figure 6 Real exchange rate (index, Jan.00-Mar.11 average=100) 170 160 150 140 130 120 110 100 90 80 70 60  Range (*)  Average  U.K.  U.S.  South Korea  Mexico  Eurozone  Peru  Japan  Norway  Poland  Malaysia  Israel  New Zealand  India  Turkey  Chile  China  Thailand  South Africa  Hungary  Philippines  Canada  Czech Rep.  Russia  Australia  Brazil  170 160 150 140 130 120 110 100 90 80 70 60  Spot  (*) The range shows maximum and minimum values posted by the local currency during indicated period. Source: Central Bank of Chile based on figures from the Bank for International Settlements (BIS).