Rogoff: "Sovereign Bankruptcy Is Trivial Compared To Lehman"

Kenneth Rogoff

Photo: Institute For NEw Economic Thinking

Harvard’s Kenneth Rogoff advocates a radical solution to Europe’s debt problem, including private sector participation and more than selective default.In an interview with Le Monde, Rogoff explained that sovereign default is a routine event and far different from the collapse of Lehman Brothers.


The real question is: Can a country survive with a bankruptcy? For Greece and Portugal, the best solution is probably to remove a large portion of their debt in order to regain growth. It would not be the end of the world.

Europe is going a little fast comparing this event to the bankruptcy of Lehman Brothers . Bankruptcy of state is actually quite trivial and we know how to handle the problem of restructuring. Even if membership in the euro zone ends up changing…

This of course doesn’t mean he supports the same for the US…

Raising the debt ceiling is necessary, provided it is accompanied with rules for budgetary discipline. Otherwise, the problem will repeat itself year after year. And one day, the U.S. could well end up by making default. This crisis is first constitution. If we remove the ceiling on debt, I do not think it will be Armageddon.

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