Nouriel Explains More Positive Outlook on Greece to WSJ
10.12.2012 10:22EconoMonitor: he recent Greek debt buyback announcement and apparent softening of German rhetoric on the troubled eurozone (EZ) member-state represents a short-term boost to morale, Nouriel Roubini told the Wall Street Journal recently, but does not change fundamental flaws in the structure of the EZ, and within Greece’s economic model. Roubini had previously held that Greece was likely to exit the EZ in H1 2013 due to a Hydra of sovereign, fiscal, banking and competitiveness crises, but told WSJ reporter Harriet Torry that if the currency bloc could agree to a transfer union, Greece could remain in the EZ:
“You have to realize that the problems of Greece are long-term, it’s going to take 10 to 20 years to do the austerity and the reform to stabilize Greece and therefore you have to give money and you have to be patient.”
Policy makers have spent numerous summits mulling over how to ring-fence Spain and Italy from Greece, and facilitate an orderly exit. But, ahead of 2013 elections, German leaders have realized that there is “no such thing” as an orderly exit:
“I think the Germans have realized that if there was a disorderly collapse of the euro zone, the loss and the damage would not be just for Greece, Ireland, Portugal, Italy, Spain — but also for Germany,” which, as a creditor of these countries, would see its own financial institutions and government shoulder the burden of a bankruptcy…A disorderly collapse of the euro zone is not in anybody’s interest.”
Nouriel continued to argue for backloaded austerity, noting the crippling effects on growth policies directed by the EZ core and troika have had on periphery countries.
Author: Nouriel Roubini
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