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  • June 2015 (Revised January 2017)
  • Case
  • HBS Case Collection

Greece's Debt: Sustainable?

By: George Serafeim
  • Format:Print
  • | Language:English
  • | Pages:19
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Abstract

The case "Greece's Debt: Sustainable?" describes the Greek economic crisis, bailout from the European Union and the International Monetary Fund (IMF), and the debt restructuring that followed. Because of a lack of trust in Greece's ability to repay its debt, two programs were organized that provided financial assistance to Greece. This was followed by a debt restructuring that provided debt relief to Greece through a combination of lowering interest rates, lengthening debt maturity, and rebates on interest and principal. The case outlines how International Financial Reporting Standards (IFRS), U.S. GAAP, and International Public Sector Accounting Standards (IPSAS) define accounting for debt and describes the controversy that existed around the proper valuation of Greece's debt. Because Greece had not adopted accrual accounting, its debt was reported in face value terms, according to the Maastricht treaty. This was in contradiction to accounting practices that prescribed fair valuation of debt in line with market prices or present value techniques. The case ends with a series of questions that steer the discussion towards the importance of accrual accounting and valuation of debt. Did Greece have too much debt and as a result a solvency problem? Should Greece push lenders to take a haircut on the debt? Were the austerity measures really necessary? Or did Greece have too little debt, therefore allowing the country to avoid austerity measures, increase spending, and spark growth?

Keywords

Debt Crisis; Accounting; Debt Sustainability; Austerity; Solvency Opinions; Borrowing and Debt; Restructuring; Valuation; Accrual Accounting; Fair Value Accounting; Economy; Greece

Citation

Serafeim, George. "Greece's Debt: Sustainable?" Harvard Business School Case 115-063, June 2015. (Revised January 2017.)
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About The Author

George Serafeim

Accounting and Management
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Related Work

    • June 2015
    • Faculty Research

    Exercise Greek Debt Final

    By: George Serafeim
    • June 2015
    • Faculty Research

    Greece's Debt: Sustainable?

    By: George Serafeim
    • June 2015 (Revised January 2017)
    • Faculty Research

    Greece's Debt: Sustainable?

    By: George Serafeim
Related Work
  • Exercise Greek Debt Final By: George Serafeim
  • Greece's Debt: Sustainable? By: George Serafeim
  • Greece's Debt: Sustainable? By: George Serafeim
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