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Ifo Sees New Greek Debt “Haircut”

carstensenWith two bailouts of $325 billion failing to make much of a dent in Greece’s crushing economic crisis, an analyst at the Ifo Institute in Munich has recommended that the country impose big losses on public investors the same way it did to those in the private sector and give everyone a big “haircut.”

Kai Carstensen said that would help Greece reduce its debt even though it means taxpayers in other countries who are footing the bill to rescue Greece will have to pay instead.

“Greece owes to the EU countries and the IMF 207 billion euros,” Carstensen highlighted at the presentation of a report of the Institute and predicted that the European Central Bank will strongly react for a possible “haircut” against Greek bonds but will relent.

“There will be tricks on the politicians can “sell” something like this to their electorate, for instance through inflation,” said the economist adding that he sees no alternative.

Carstensen also said: “If the debt remains high, he explained, Greece will not be able to see daylight. In order the reforms in the country not to stop, the debt should not be deleted at once, but gradually.”

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