Tags: Ross | Greece | eurozone | europe

Wilbur Ross: Greece Worse Off Than Most Realize

Tuesday, 14 August 2012 09:20 AM

The Greek economy is in much worse shape than most realize and will soon be shown the exit door of the eurozone, which isn't a bad thing, said venture capitalist Wilbur Ross, chairman and CEO of WL Ross and Co.

Most people in Greece expect to leave the currency zone anyway, Ross added.

"There's almost a feeling of resignation, both among the people on the street and the wealthy people that eventually Greece doesn't stay in the EU," Ross told CNBC.

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

A Greek default and exit from the eurozone wouldn't rattle the European economy as much as in the past, as most countries are prepared for it and most private debt has been restructured.

Fears have persisted for years now that a Greek exit from the currency zone would pressure Spain to follow suit, which really would roil markets and the global economy.

"I've been in favor of Greece going out, frankly both from the Greek point of view and the EU point of view," Ross said.

"I think there are enough firewalls being built up, particularly now that (European Central Bank Chief) Mario Draghi is acting like the lender of last resort, that I don't think it would be that traumatic anymore. Most of the indebtedness of Greece is official debt, no longer private debt, so you don't have the domino problem."

Draghi said recently that the European Central Bank is prepared to do what it can to save the eurozone, which markets interpreted as a hint he will restart a program to buy sovereign Spanish and Italian debt in the open market to lower borrowing costs there in a way that would firewall the crisis in the smaller Greece, where it could be extinguished.

Greece remains stuck in its fifth consecutive year of depression with no end in sight — the country's gross domestic product contracted 6.2 percent in the second quarter of this year, according to the most recent government data.

The country has agreed to painful austerity measures, such as spending cuts and public-sector layoffs, to streamline its economy in exchange for access to bailout funding arranged by its neighbors.

Such belt-tightening measures, however, have decimated growth.

"We project GDP to contract by 7.1 percent in 2012 and by 2.4 percent in 2013, on the back of further significant declines in disposable incomes, rising unemployment and plummeting investment activity," said Eurobank economist Theodore Stamatiou, according to Reuters.

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

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