A Bloomberg report shows that the organizations that finance these huge emerging nation loans have badly miscalculated the economic prospects.
Unrealistic due diligence is a part of the reasons for failures like with Greece.
The organizations that finance should have relied on others for growth projections.
Having the people that write the loan checks make the assumptions is probably a bad idea.
Lesson learned is that they need a Plan B due diligence approach.
What do you think?
For example, in 2010, as Greece signed a bailout deal with the International Monetary Fund, who projected ability to pay and how. Many of these forecasts of supporting loan growth and the future ability to repay were made by the IMF and the European Commission.
Reports suggest that the projections assumed such things as Greece’s debt-to-GDP ratio would peak below 150 percent of gross domestic product in 2012. Their forecasts also projected that Greek GDP in 2015 would be 8 percent larger than in 2011. T
his optimistic vision of the future was based on underlying assumptions that Greece would go from having the lowest productivity growth in the euro zone to instead having an improvement to becoming among the highest. That means becoming relatively as strong in some metrics as the productivity of Germany!
That’s incredible. Greece probably never had a chance.
Are the new 2015 assumptions going forward any better? Are the same rosy colored economic improvement forecast being made for loans elsewhere from Mongolia to Africa?
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