Ashoka Mody argues in an Econbrowser blog post that recent IMF research should guide a Greek deal. According to Mody this research shows that debt overhang is very costly; “austerity” can be self defeating; and structural reforms generate uncertain payoffs. He therefore recommends
- large scale debt relief, resulting in a debt quota of 50%,
- a scale down of the banking system, and
- a primary surplus quota of 0.5% over the coming years.
Olivier Blanchard, IMF chief economist, disagrees.