Reuters
September 21, 2011
Euro zone leaders may reject the notion of a "Greek default." But private sector economists and political analysts are largely agreed that it is only a matter of time.
The questions that raises -- and they are vast -- include: what would the impact on European banks be? How much capital would need to be injected into the system? How would that be carried out? And would it stop contagion beyond Greece?
That Greece's debt dynamics are unsustainable is no longer seriously in question. With a debt-to-GDP ratio of around 160 percent and climbing, the burden on the state is close to unbearable. Further EU/IMF emergency aid is not guaranteed. Some analysts now expect a default as early as November or December.
Guntram Wolff, the deputy director of Bruegel, a think-tank whose analysis frequently informs EU policymaking, believes Greece's debt ratio needs to be reduced by around 50 percentage points if Athens is to approach long-term debt sustainability.
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