Expert on chances of Greece leaving eurozone

American economist and Nobel Prize winner Paul Krugman has raised doubts that a rescue plan worth EUR 110bn for debt-stricken Greece will be effective.

Izvor: Tanjug

Friday, 04.06.2010.

16:33

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American economist and Nobel Prize winner Paul Krugman has raised doubts that a rescue plan worth EUR 110bn for debt-stricken Greece will be effective. He noted that he believed the country still faced a 50-50 chance of ejection from the eurozone. Expert on chances of Greece leaving eurozone Krugman said he did not understand how the IMF-proposed severe austerity plan is supposed to work. “Through monstrous sacrifice, what Greece manages to do over the next five years is increase its debt from 115 to 140 percent of GDP,” he said. “And for some reason, we’re supposed to believe that as of 2015, Greece regains access to the (financial) markets and everything is fine. I don’t quite understand why that’s supposed to work,” said the economist . He added that eurozone countries were unable to leave the euro because “to do so would be to invite massive bank runs”. “But what if the bank runs happen anyway,” he asked, pointing to the debt crisis in Argentina in 2001 when banks were forced to close. “Once you’ve done that, the possibility of exiting the single currency arises,” Krugman explained. “I would say that there is about a 50-50 chance in the case of Greece that something like that will happen — that we’ll finally see it ejected from the euro,” he concluded.

Expert on chances of Greece leaving eurozone

Krugman said he did not understand how the IMF-proposed severe austerity plan is supposed to work.

“Through monstrous sacrifice, what Greece manages to do over the next five years is increase its debt from 115 to 140 percent of GDP,” he said.

“And for some reason, we’re supposed to believe that as of 2015, Greece regains access to the (financial) markets and everything is fine. I don’t quite understand why that’s supposed to work,” said the economist .

He added that eurozone countries were unable to leave the euro because “to do so would be to invite massive bank runs”.

“But what if the bank runs happen anyway,” he asked, pointing to the debt crisis in Argentina in 2001 when banks were forced to close.

“Once you’ve done that, the possibility of exiting the single currency arises,” Krugman explained.

“I would say that there is about a 50-50 chance in the case of Greece that something like that will happen — that we’ll finally see it ejected from the euro,” he concluded.

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