Euro Plan Only Buys Time, More Defaults Ahead

One of the world’s leading experts on sovereign debt crises sounded none too pleased with the euro zone’s new bailout plan announced yesterday. Kenneth Rogoff – a Harvard economics professor, former chief economist at the International Monetary Fund, and author of This Time is Different – stated that the plan “feels at its root to me like more of the same, where they’ve figured how to buy a couple of months.”

Speaking at the Bloomberg FX11 Summit in New York, Rogoff contended that “It’s pretty darn clear the euro does not work, that it’s not a stable equilibrium.”

Rogoff went on to say that “I don’t think there’s any doubt that we’ll see more defaults beyond Greece. The interesting question is will all the countries in the euro still be in the euro? My answer to that is no.”

“There’s just too many inconsistencies,” Rogoff added. The fact that a large number of independent nations are using a shared currency “is missing some big things and it’s just not in equilibrium.”

As for the positive response by financial markets yesterday, Rogoff stated that “My read of this is that the markets are cheered that they’re still alive. Even in a fairly short period, doubts will start to grow again.”


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