Tags: Allen | Greece | Leave | Eurozone

Wharton’s Franklin Allen: Greece Poised to Leave Eurozone

By    |   Friday, 03 February 2012 12:55 PM

Greece will leave the eurozone, predicts Wharton finance professor Franklin Allen.

The latest European summit calls for stronger fiscal controls and oversight of budges of European Union countries. The fiscal pact is supposed to keep spending under control.

But because it has so many "get outs," it doesn’t force member countries do change anything any time soon, Allen states on Wharton's blog, Knowledge Today.

"The Growth and Stability Act did not work and this is more of the same," Allen says.

Another problem with the pact, says Wharton management professor Mauro Guillen in the same article, is that it will take months or years to implement. Investors and markets want answers quickly. It won't fix today's problems.

German Chancellor Angela Merkel prompted outrage among Greeks when she proposed European Union control of Greece's budget.

"I think the Greeks," Allen says, "are quite right to be outraged at this."It underlines the real problem in the euro as currently constituted. I think Greece will leave the euro, perhaps temporarily, and this will de facto become the discipline device."

Many financial experts say Greece may leave the euro. Paul Krugman, a New York Times columnists and Nobel economics prize winner, believes Greece will default and probably leave the euro.

"The Greek situation is essentially impossible,” Krugman said at a conference in Moscow, according to Bloomberg. "They will default on their debt. In fact they already have. The question is whether they will also leave the euro, which I think at this point is more likely than not."

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Friday, 03 February 2012 12:55 PM
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