Harvard’s Kenneth Rogoff believes that far more IMF European bailouts are on the way, in addition to Greece.
“It’s more likely than not that we’ll need an IMF program in at least one more country in the euro area over the next two to three years,” Rogoff, a former IMF chief economist who has co-authored studies of financial and sovereign debt crises, said in a telephone interview. “The budget cuts needed in Europe in many countries are profound.”
He sees a higher than 50% chance that other Eurozone nations will need IMF financial support. He also affirms that Greece will require far more financial support than is currently being negotiated. Note that yesterday, it was suggested that Greece could require as much as 300 billion euros.
“The stakes are very high for Europe as it wants to avoid contagion,” said Rogoff, who in 2008 predicted the failure of some large U.S. banks prior to the collapse of Lehman Brothers Holdings Inc.
“I wouldn’t say they have to have an IMF program, but it’s possible,” said Rogoff of Spain, Portugal and Ireland. “It’s hard to say, as so much depends on political will and the numbers.”
“Recovery will mitigate the debt problems,” Rogoff said. “It’s very hard for Europe to get a sustained recovery.”
Forget bailouts, that’s the real bomb he just dropped.
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