[ anon7994 @ 28.01.2010. 11:01 ] @
|IMF money only buys time for troubled economies, not all of them will avoid default - Rogoff|
Kenneth Rogoff, former Chief Economist of the International Monetary Fund (IMF), said not every country in Europe leaning on IMF funds will make it and there will be sovereign defaults in the years to come.
Despite financial help by the IMF, several European economies, including Hungary, are at risk, Rogoff told Austrian daily Der Standard at the World Economic Forum’s annual meeting in Davos, Switzerland on Wednesday.
(Photo by IMF) Rogoff, a Harvard University Professor, said the IMF has given and is providing a lot of financial support to European countries grappling with high budget deficits, which this way are "buying some time". But it will be hard to save each one of them, because some of these states have accumulated "intolerably high" deficits, he added.
As long as they gain access to funds on favourable conditions, they have a chance to avoid meltdown. But only a few countries are in a political situation that would allow them to see through rigorous programmes of spending cuts, Rogoff said.
"In the years to come we will see a few defaults," he added.
He named Ukraine, Latvia, Romania, Hungary and Greece among the countries at risk, but noted that Ireland and Portugal are not without problems, either.
"The IMF bought them time, but not all of them will survive the challenge," Rogoff said.
National banking crises are often followed by fiscal crises, as well. This time the problem primarily affects Eastern Europe. Once international guarantees run out, a tough period will dawn on countries with strong banking presence in the region. Austria has no reason to fear a sovereign default, but a banking crisis, yes.