Greece’s bailout will eventually bring down the euro, Monument Securities Chief Economist Stephen Lewis says.
The euro’s future is precarious because of the large budget deficits incurred by euro zone countries, leaving few viable alternatives, Lewis said.
“The IMF could not insist on a Greek devaluation because that would have been tantamount to Greece’s leaving the euro zone. If the euro zone started shedding members, it would at least bring the euro arrangements into question,” he told CNBC.
The bailout is the right approach since the other options would have further weakened the euro, Lewis said.
“If Greece’s creditors had been obliged to take a hit, where would that have left the creditors of other euro zone countries with relatively large government deficits?”
“The risk would have been that a debt restructuring would have increased the virulence of the contagion from Greece and, ultimately, would have generated extreme uncertainty over the future of the euro currency,” he said.
Germany’s issues are not the cause of further erosion of the euro, Lewis said.
“In truth, though, Germany is just as much a victim of these attempts to shore up the euro as is Greece, and a victim with a stronger claim to innocence. The guilty men are the eurocrats who stubbornly refuse to recognize that their fanciful construction is collapsing like a Tower of Babel,” he said.
The bailout package will not prevent the euro from falling even lower, said Alan Ruskin, chief international strategist at RBS Securities, Reuters reported.
The package “will do no more than pad the euro downside against a sharp collapse rather than turn it around,” he said.
© 2017 Newsmax Finance. All rights reserved.