Greece's European creditors must loosen the conditions for another bailout to avoid sending the beleaguered economy into collapse, says Nobel laureate economist Joseph Stiglitz.
The austerity requirements for Greece imposed by European governments, the European Central Bank and the IMF have led so far to a 25 percent plunge in Greek GDP and a jump in the unemployment rate to 28 percent, Stiglitz writes in USA Today
"I don't believe Europe's leaders were seeking to punish Greece," he says. "They were just using bad models—evidenced by the enormous gap between what they thought would happen and what did happen. Europe and the IMF predicted a fairly quick turnaround. The reality was deepening recession."
Greece promised in a letter to its European partners Wednesday that it will implement pension and tax reforms as early as next week in return for a three-year rescue loan. Greece's European creditors have set a deadline of Sunday for Greece to reach a debt accord.
Meanwhile, as the negotiations continue, star investor Wilbur Ross, CEO of WL Ross & Co., sees a bit of hope for success. That's because the alternative would be so unpalatable.
The odds of Greece staying in the eurozone are 60 percent, he told CNBC
. If Greece abandoned the euro, that would mean a return to the drachma.
"The drachma-ization would be terrible for the whole country, including for the banks," because euros in foreign accounts and "under mattresses" wouldn't come back into circulation," Ross said. "My guess is you would have the drachma trading somewhere between 25 cents to 50 cents on the euro. So it would be a pretty bad haircut for the people."
Ross thinks Greece will offer a debt restructuring proposal that can lead to an agreement with its creditors. After all, Germany wants Greece to remain in the eurozone to avoid inviting other nations to exit, he said. And the Greek people and leaders also want to stay.
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