NEWS

Greece will default, economy guru says

The Greek government will not be able to avoid restructuring its debt despite its ongoing austerity drive, eminent American economist Nouriel Roubini has told Kathimerini. «If you don’t want to call it default or bankruptcy, call it a restructuring under pressure, but it’s going to happen,» said the New York University professor in an interview published in yesterday’s Kathimerini. Roubini, who has been dubbed «Dr Doom» for his pessimistic economic outlook, has described Greece as «the Lehman Brothers of Europe» – a reference to the US investment bank whose collapse in 2008 triggered turmoil across the global financial markets. Roubini said the Greek government’s austerity measures – chiefly tax increases and cuts to civil servants’ salaries – had helped to plug a gaping budget deficit but had caused other problems. «As was expected… tax increases and reduced spending have curbed demand and caused gross domestic product to shrink,» he said. Roubini said the best-case scenario for Greece would be «the stabilization of Greece’s public debt at 148 percent of GDP.» «In my opinion this is just not viable. It is impossible for Greece to survive with a debt reaching 150 percent of output… a controlled restructuring of the debt will be required,» the professor told Kathimerini. «It has happened so many times before. Nobody believes that it will not also happen in Greece’s case,» Roubini added. Several countries, including Ukraine, Pakistan and Uruguay, have been obliged to restructure their debt due to the looming threat of bankruptcy, the professor remarked. Finance Minister Giorgos Papaconstantinou, who has vehemently and consistently ruled out debt restructuring as an option for Greece, told the daily Imerisia in an interview published on Saturday that the government was on track with its revenue-raising reforms and would not need an extension for the repayment of a 110-billion-euro rescue package from the European Union and International Monetary Fund, due to expire in 2013. «From 2012… the deficit will drop and we will have a primary surplus that will cover part of our debt servicing needs,» Papaconstantinou said.