Greek Debt Haircut Inevitable but Unlikely Until 2013: Legal & General Strategist

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Ben Bennett, credit strategist at the UK financial services firm Legal & General, shares his outlook on the Greek debt crisis. Bennett: “We did a lot of analysis trying to work out if there was a middle ground where Greece could haircut its debt in order to make it somewhat sustainable going forward … and [we found out] there wasn't.” Hence, Greece and the rest of the European financial system have no choice but to “kick the can” with short term cash infusions if the European banking system is to remain stable. But how long will these tactics be able to delay the inevitable? According to Bennett, the final analysis of Greece's viability as a member of the EU currency system will come in 2013. As there is a “slim chance” that the indebted sovereign will be able to manage its own debt at that point, the terms of its deficit will have to be reassessed. “Now the plan, hopefully, is that the other countries that are currently warbling will be recapitalized by that time. At that stage they can haircut Greek debt without facing the systemic ramifications they would if they did that [at present].”

Bennett's outlook on the Eurocrisis is that European financial institutions are “just playing for time,” in the hope that other indebted countries like Ireland and Spain will be able to weather the storm into 2013. Luckily for the Eurozone, on the scale of long-term banking strategy “two years is not a lot of time.”

Download the full podcast for Bennett's assessment of Societe Generale, Deutche Bank, and other Euro heavyweights' outlooks for the Greek debt crisis.


 

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