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Prospects on Greek Debt Crisis - Liliana Rojas-Suarez on CNN

2/27/12

In this interview Liliana Rojas-Suarez argues that for a true and lasting solution to the Greek crisis to occur, a deeper restructuring of sovereign debt is needed (one that is based on the country's capacity to repay, and not on arbitrarily-determined goals for debt ratios; i.e. 120% debt/GPP by 2020) . Since the likelihood of key Eurozone members (especially Germany) to agree on further debt restructurings (including ECB’s holdings of Greek debt) is very low, the most likely scenario is still one where Greece leaves the Eurozone. This would allow for a depreciation of the domestic currency to boost competitiveness. In this scenario, it is essential a re-design of the IMF program to include the avoidance of a banking crisis (which could occur if banks' borrowers, earning' income  denominated in a depreciated currency, are not able to make good on  payments on Euro-denominated loans).