Tags: marc | faber | Greece | Debt | Writedown

Faber: Greece Needs 50 Percent Debt Writedown

Friday, 30 Apr 2010 03:15 PM

Economist Marc Faber, publisher of the Gloom, Boom and Doom report, says Greece needs a debt writedown of as much as 50 percent.

“They would have to pay back 30 to 50 cents on the dollar,” and the banks would have to take the losses, Faber says.

“If it’s bust, doesn’t help to extend loans or increase loans,” he says, comparing Greece to a corporation that has gone bust.

Those who lent money to Greece and bought its bonds should have looked more carefully, says Faber and should bear the brunt of the losses, Faber says.

“There was excessive consumption (in Greece) and when you have excessive consumption, the level of debt goes up substantially and one day you just can’t pay,” he told Bloomberg.

Faber says he’s not sure that Greece’s problems signal the beginning of the end of the euro zone, but stresses that the bailout Greece package currently on the table is “simply postponing the problem.”

“In a democracy, no problems are solved — they are just postponed until the ultimate crash will destroy everything.”

Volatility in European sovereign debt markets continued today, despite news that a Greek bailout package will probably be launched this weekend, The Wall Street Journal reports.

Greek five-year credit default swaps were quoted at 695 basis points on Friday afternoon, according to Markit, compared with Thursday's closing level of 685 basis points. (One basis point is equivalent to 0.01%, or one-hundredth of a percentage point.)

The country traded as tight as 600 basis points earlier Friday and above 900 basis points Wednesday, in a week which has seen unprecedented volatility in sovereign debt markets.

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