This week’s IGM Economic Experts Panel statement:
In 10 years, per capita purchasing power in Greece will be higher if — rather than continuing to service its debts over the next decade and complying with the budget rules currently in place — it refuses to accept a continuation of its current troika program and explicitly defaults on its debt held by the official sector.
Keyword: Eurozone
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This week’s IGM Economic Experts Panel statement:
The recent oversubscribed debt issues of Greece and Portugal suggest that sovereign default by any euro area country is unlikely in the foreseeable future.
This week’s IGM Economic Experts Panel statements:
A. Even if all the official-sector funding that Greece received from 2010 through August 2012 is written off, propping up Greece to buy time for the rest of Europe to prepare for Greek default has been better for citizens of the Eurozone outside of Greece than a policy that would have cut off funding sooner.
B. A substantial sovereign-debt default by some combination of Greece, Ireland, Italy, Portugal and Spain is a necessary condition for the euro area as a whole to grow at its pre-crisis trend rate over the next three years.
C. Unless there is a substantial default by some combination of Greece, Ireland, Italy, Portugal and Spain on their sovereign debt and commercial bank debt, plus credible reforms to prevent excessive borrowing in the future, the euro area is headed for a costly financial meltdown and a prolonged recession.
This week’s IGM Economic Experts Panel statements:
A) Assuming that Germany eventually agrees to backstop the debt of southern European countries, the eurozone as a whole will be better off if that bailout is unconditional, rather than accompanied by the labor market reforms and future budget controls that Germany is demanding of countries in return.
B) If Germany fails to bail out the southern tier of Europe, its own economy will be hurt more — because of output and asset losses — than it would be by an unconditional bailout.
C) The main reason other eurozone countries need to worry about Greek banks losing access to ECB support is because the ensuing chaos in Greece could trigger bank runs in peripheral countries.
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