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A protester holds up a Greek flag during an anti-austerity demonstration in front of the parliament in Athens February 22, 2012.

YANNIS BEHRAKIS/REUTERS

Greece's slow recovery and crushing debt load are propelling the country toward its third bailout. That's the conventional view. Jeroen Dijsselbloem, president of the euro zone's finance ministers' group, said as much the other day and Greece's Finance Minister, Yannis Stournaras, is lobbying hard for a second debt-crunching exercise.

But what if Greece's big fat debt – equivalent to 174 per cent of gross domestic product – is much slimmer than it appears? What if it's not really debt at all? Indeed, the series of maturity extensions and interest rate reductions are giving the debt a rather grant-like flavour. This is Europe's dirty little secret, one that is designed to give taxpayers in Europe's wealthy north the impression that the loans their governments have guaranteed will be paid back in full as Greece, through austerity and reform, goes through a punishing economic fix-it exercise.

Barring another catastrophe, the loans probably will be paid back. But it will happen so far down the road, and at such as a low relative financial cost to the Greek state, that complaining about the size of the debt today, as Mr. Stournaras is doing, seems a rather hollow exercise.

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On paper, Greece's debt is indeed horrendous. Measured against gross domestic product, it is the highest in Europe by a long shot (Italy, with debt-to-GDP of about 130 per cent, is second) and almost twice as high as the average among the 18 euro zone countries. In the industrialized world, only Japan's is higher.

There is no doubt that the debt is unsustainably large for such as small, feeble and battle-worn economy. The sad truth is that Greece doesn't make much that the world needs, so the country can forget about an export-led manufacturing bonanza to cure its woes. But that doesn't mean an economic rebound is out of the question.

Greece's recession is coming to an end after six horrific years, during which the economy shrank 25 per cent, pushing the jobless rate to more than 27 per cent. While growth will be barely perceptible this year, it should rebound next year. Unemployment is finally nudging down, foreign investment is picking up, tourism is at record levels and the treasury has made a small but triumphant return to the bond market.

If you believe Greece's bailout sponsors – the European Union, the European Central Bank and the International Monetary Fund, collectively known as the Troika – Greece's debt should fall to about 128 per cent of GDP by 2020. The figure assumes longer-term growth of about 3 per cent and rising primary surpluses (the budget surplus excluding debt payments), neither of which is sheer fantasy. Greece is already posting a small primary surplus, one that should expand nicely after 2014. It also assumes tax "buoyancy," economist-speak for the belief that tax revenue growth will exceed GDP growth.

The unrealistic bit is the Troika's assumption that privatization revenues will go from a trickle to gusher. The privatization campaign has pretty much gone nowhere since the country's first bailout in 2010. The whole effort is so bureaucratic, unpopular and politically charged that any revenue assumptions are wild guesses.

The Organization for Economic Co-operation and Development thinks the Troika's debt reduction forecast is optimistic – it forecasts Greek debt at 157 per cent of GDP in 2020 – and it could be right. But so what? In late 2012, when the Greek crisis was near its peak and its recession getting worse by the minute, the EU took pity and deferred for 10 years the interest on €144-billion ($215-billion) in loans from the European Financial Stability Facility, the original bailout program. The gift covered almost half of Greece's public debt and was estimated to save Greece about €13-billion by 2016 alone. Debt maturities were lengthened and the interest on a smaller, but still significant, loan from the first bailout was reduced to half a percentage point above the euro interbank offered rate (Euribor).

The upshot is that Greece's cash debt payments in the next few years will be the equivalent of 3 per cent of GDP. That should be manageable. It's also possible that Greece will get more gifts later this year, when it goes pleading to the EU for more relief. But given the extensive maturity extensions and interest reductions awarded so far, any new repayment program will be little more than symbolic, better PR value than financial value.

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What Greece really wants is a massive debt writeoff similar to that suffered by private creditors that, in one fell swoop in 2012, knocked more than €100-billion off the country's debt load.

Dream on. Today, the vast bulk of Greece's debt is held through the EU and IMF bailout funds, with some Greek bonds on the ECB's books. The threesome is in no mood to take a haircut on their Greek debt and have said so. If some relief is given, it would, again, be largely symbolic and political, perhaps designed to give Greece's pro-austerity centre-right government a boost as the radical left, anti-austerity party, Syriza, comes on strong. Syriza placed first among Greek voters in May's European Parliament elections.

What the Greece government and the Troika will not tell you is that the Greek debt is becoming so cheap and its maturities so long that calling it debt is to stretch the definition of the term. The money it owes occupies a netherworld between real debt and free money. Other bailed-out countries should be so lucky.

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