Greece is in the process of restructuring its debts with private creditors and when the dust settles in Athens, Portugal will definitely undergo a similar process, says Harvard professor Kenneth Rogoff.
"That we are going to need restructurings in Greece and Portugal is just clear, probably also in Ireland, where it would be enough to do the bank debt, and in Spain probably as well, if you include the private-sector debt, the big banks," says Rogoff, according to the Wall Street Journal.
"Italy is a borderline case, where it may just be a liquidity issue."
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Asking debt-ridden countries to undergo tough austerity measures alone won't work because such policies cut into growth as a side effect to trimming debts.
"You can’t just ask the peripheral countries to just suck it up and then pay because they are being asked to do things politically that have just never been done," Rogoff says.
"We looked at the case of Romania, where [former dictator Nicolae] Ceausescu became fixated on repaying the debt. They did it, but no one could have heat during the winter. The people were miserable. It’s simply not sustainable in a democracy."
German officials, meanwhile, have stepped up its pressure on Greece to work out a solution to its problems, even calling on Athens to allow outsiders to dictate budget policies.
"We need more leadership and monitoring when it comes to implementing the reform course," Germany Economy Minister Philipp Roesler tells Bild newspaper, according to Reuters.
"If the Greeks aren't able to succeed themselves with this, then there must be stronger leadership and monitoring from abroad, for example through the EU."
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