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Sovereign Debt Problems in Advanced Industrial Countries
Citigroup's Chief Economist Willem Buiter discusses the future of sovereign debt in the wake of the crisis in Greece.
Speaker: Willem Buiter, Chief Economist, Citigroup
Presider: Michael J. Elliott, Deputy Managing Editor, Time Magazine
May 7, 2010
Willem Buiter, chief economist of Citigroup, said Greece's fiscal problems are considerably worse than others in the eurozone, but he still warned of the risk of contagion in the current debt crisis. Speaking in a May 7 meeting at the Council on Foreign Relations, Buiter said nervous investors could end up "locking out of the markets" countries such as Spain, Portugal, Ireland, and Italy. Since the European Central Bank (ECB) is the only entity with the ability to tide over another sovereign, he expects the ECB to "engage in euro-style quantitative easing, buying sovereign debt outright."
Buiter criticized EU leaders' handling of the Greek crisis, saying "it's been a disgraceful episode for European heads of state, especially in Germany, for the narrow-minded parochialism that has been displayed, on a way that really endangers not just the euro area but the whole European Union."
Buiter also said he expects that a body such as a European Monetary Fund will emerge, which will "share with the IMF the ability to organize sovereign restructurings." He anticipates this is likely in the "not-too-distant future."
As for the United States, Buiter cautions about the risks of U.S. inaction on fiscal discipline in the next few years. He said: "If, over the next two or three years, all that happens by way of fiscal tightening in the U.S. is the expiry of the Bush tax cuts on the upper quartile of the income distribution, then three years from now the U.S. will have lost its triple-A rating."
This meeting was part of the C. Peter McColough Series on International Economics.
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Citigroup's Chief Economist Willem Buiter discusses the future of sovereign debt in the wake of the crisis in Greece.
Citigroup's Chief Economist Willem Buiter discusses the future of sovereign debt in the wake of the crisis in Greece.
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