Harvard University professor Kenneth Rogoff said Greece may yet default on its debts even after the euro member received a bailout from the European Union and the International Monetary Fund to help keep it afloat.
“Greece has quite a track record of default,” Rogoff said today in a presentation delivered at a conference hosted by the Oslo-based Confederation of Norwegian Enterprise. “That is certainly something we may see in the future.”
Though the single currency shared by 17 European Union nations is likely to continue, a few of the region’s members will probably have to restructure their debts, Rogoff said. Euro-region leaders last month agreed to amend the bloc’s treaties to put in place a permanent crisis mechanism in 2013 to contain future debt shocks. That mechanism won’t address existing budget stresses faced by countries including Portugal and Spain.
“We have Ireland, Portugal, Greece, people are worried about Spain,” said Rogoff, who is also a former IMF chief economist. “The debt problems across the periphery countries in Europe are really quite profound; the most likely scenario is that we are going to see a few of the countries end up restructuring their debt.”
Greece, which received a 110 billion-euro ($146 billion) loan from the EU and IMF in May after it was unable to repay its debts, will this year post a 7.4 percent budget deficit of gross domestic product, compared with a 9.6 percent shortfall in 2010 and a 15.4 percent gap the previous year, the European Commission said on Nov. 29.
Ireland, which received an 85 billion-euro rescue package last quarter, will this year post the widest deficit in the EU at 10.3 percent of GDP, following 2010’s 32.3 percent, according to the commission.
Rogoff, whose 2009 book “This Time Is Different,” co- written with Carmen M. Reinhart, charts the history of financial crises, said the euro will survive the fiscal distress caused by multiple defaults thanks to political will in the region’s biggest economies to maintain the currency union.
“There is a huge political commitment in Germany to continue,” he said. Even so, following the debt crisis, Europe looks like an “emerging economy,” he said.
The euro lost 0.4 percent against the dollar to trade at 1.3262 at 9:40 a.m. in London. The currency has declined 6.6 percent since a Nov. 4 high.
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