Greek Default Is Imminent; Here's Why
Will they? Won't they? Those seem to be the questions on everybody's mind regarding Greece defaulting on its debt. Charles Robertson, global chief economist at Renaissance Capital, was on CNBC Thursday to explain why he thinks Greece will default on its debt. He also discussed whether Greeks would see an imminent return of the drachma.
Default Will Happen
"I think the default is a given," Robertson began, "but not necessarily this year."
He explained, "I do think it's a given, and partly because of the demographic factors [...] The demographics of Greece are awful on the next 10 to 20 years. It's an ageing society; the number of people working and able to provide tax revenues to the government is going to be going down. And that we are arguing means the Greek debt is unsustainable on a multi-decade view, as well as looking unsustainable on the short term."
He continued, "So, the debt default is very much part of what Syriza (current ruling party in Greece) is trying to push; it's what the U.S., the IMF seem to support. I mean, I read the IMF report saying that they need the debt default now because of Syriza, because of the way it has mucked up the economy.
"And the parallel currency that comes about if Sunday goes badly, if the Germans are not prepared to back a deal."
Parallel Currency Leading To Drachma
Robertson was asked if a parallel currency is the way to go forward for Greece. He replied, "If Greece wants to get its unemployment rate down faster, then a parallel currency leading to the drachma is probably the quickest way to do it. And it gives a left wing government like Syriza more tools to enact the policies it would like to do."
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