Economics: Greece May Yet Have to Restructure Its Finances

Standard & Poor's said in late April that investors could expect to recover 30% to 50% of their money [if Greece defaults].

Right now, Greece needs to borrow to help pay for the daily operations of government, like salaries for government workers. So it needs to keep creditors happy. In fact, in 2009, the country was already €20 billion in deficit before it forked out for interest payments.

But by 2012 that so-called primary deficit will flip to a surplus of about €2.4 billion, according to IMF estimates. That means Greece will be generating enough money to fund itself, and instead would be borrowing just to fund its interest payments, a precarious cycle.

In that situation, it could better afford to restructure and presumably anger lenders. [Emphasis mine]

For more, see Greece May Yet Have to Restructure Its Finances by Charles Forelle and Tom Lauricella, May 28, 2010.