Nouriel Roubini and Greek Debt Crisis: IMF and Eurozone Bailout “Is Not Going to Work”
During a panel discussion conducted by the Milken Institute on the Greek debt crisis, as well as in comments to the media, Professor Nouriel Roubini relayed a stark assessment on the situation. His assessment of the planned bailout of Greece by the International Monetary Fund and the Eurozone nations, especially (if reluctantly) Germany, was damning. The bailout will not work, Roubini emphasized, as the problem confronting Greece was not one of illiquidity but rather the far more dire circumstance of insolvency.
Roubini made several references to Argentina’s fiscal crisis at the turn of the current century, which culminated in default on the national debt because of egregious errors made by policymakers. The failure of policymakers in the Eurozone to recognize that Greece is insolvent and requires debt restructuring, rather than a bailout in the hope of calming markets, will make a bad situation far worse, and waste an enormous amount of public money.
“Greece is just the tip of the iceberg, or the canary in the coal mine for a much broader range of fiscal problems,” said Roubini. The disorderly debt default of Greece would spread contagion throughout other highly leveraged economies in the Eurozone, he warned.
