Ken Rogoff: It’s Not Just Greece

ken rogoff
Ken Rogoff in Davos

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All eyes are on Greece as debt swap talks are still at an impasse, and the country inches closer to default.In a new interview with Bloomberg TV, Ken Rogoff, former chief economist at the IMF, notes that Europe isn’t prepared for a Greek default.  But he also warns Greece isn’t the only misfit in Europe: 

“I hear so many people say its just Greece, Greece misbehaved, if only we hand’t admitted Greece. This is just ridiculous. I mean the problems are also elsewhere, they’re not necessarily as deep, but I think you’re going to need to see other restructurings before this is over and I don’t know how they’re going to react.”

Rogoff actually believes that Europe’s financial situation is manageable.  But he also said a large part of the problem was the European Union’s voting structure, which prevented officials from reaching “any decisions, no matter how obvious”. He also pointed to the problem of moral hazard with the haircuts on Greek bonds:

“What you mean by that is how deep does it really have to be before its credible… and I think there’s a fairness issue between creditors and debtors that sorta has to get sorted out. But there’s no question in the case of Greece that it has to be a very, very deep haircut. It might have to be smaller in some of the other countries, but of course that’s awkward because once you set the precedent, then say Portugal to pick an example, they’re going to go hey look how much you gave Greece, why don’t we get the same.

Here’s the interview via Bloomberg TV:


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