Standard & Poor’s recently cut the credit rating of Greece, as well as Spain and Portugal, indicating that the crisis in Greece is spreading across Europe. In order to avert the crisis, Greece will need to engineer an “enormous fiscal cut” in order to stabilize their rising government debt, said Uri Dadush. However, it will be “very difficult for the Greeks to dig themselves out of this situation while maintaining their projected debt payments.”
Given the financial market pressure on Greece, “inevitably, some kind of restructuring of the debt has to happen” but it remains to be seen when this occurs. It can happen now, under tremendous market pressure and when banks will be extremely fragile, or, if the EU and IMF provide sufficient support, it can happen in the coming years once the world economy has recovered.
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