Dr Sinn argues Greece should leave Eurozone

Pittsburgh News.Net
Saturday 4th September, 2010

A top German economist has said that the EU’s austerity measures for Greece cannot work and will run the risk of civil war in the debt-laden country.

Hans-Werner Sinn, head of the prestigious IFO Institute in Munich, made his comments at the European House Ambrosetti forum at Lake Como and called on Greece to remove itself from the Eurozone.

“The policy of forced ‘internal devaluation’, deflation, and depression could risk driving Greece to the edge of a civil war. It is impossible to cut wages and prices by 30% without major riots,” Hans told delegates.

“Greece would have been bankrupt without the rescue measures. All the alternatives are terrible but the least terrible is for the country to get out of the eurozone, even if this kills the Greek banks.”

The EU has already pledged Euro 80 billion, while the IMF has loaned Greece Euro 30 billion in order to prevent bankruptcy.

In trying to enact massive spending cuts, Greece has been rocked by civil unrest, but has been holding together rather well. Dr Sinn pointed out that unemployment is rising fast and political fatigue with such measures usually sets in during the second year, which Greece will soon enter.

The EU’s bail out was meant to carry Greece for the next two and a half years, protecting the country from global capital markets, but bonds on Greek debt have surged in recent weeks to levels seen during the initial crisis months.

“We are in the second Greek crisis right now, today,” Dr Sinn ominously declared.

According to an IMF study, Greece’s debt will climb to over 150% of GDP in the next four years even if the country complies fully with their austerity measures, leading many to worry that the country will lead to the collapse of confidence in the entire Eurozone.

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