IIF Sees Greek Debt Resolution a ‘Key Challenge’; Portugal, Italy at Risk

An orderly resolution of the Greek debt crisis “remains a key challenge,” and there is the “risk of a subsequent debt restructuring,” following the pending private-sector involvement deal, the Institute of International Finance said in its Feb. Global Economic Monitor.

The IIF said its “main worries” about the global economic outlook are “heavily centered on Europe,” with one of the main issues being “uncertainty” about whether Greece’s government will be able to stick to the European Union-International Monetary Fund program, as well as the “growing domestic unrest” in the country. There may be some prospects for a recovery in Greece in the second half of 2012, the IIF said.

The IIF is also concerned that Portugal, which is at risk of contagion from Greece, may miss its “very ambitious” fiscal target for 2012. Spain’s “significant fiscal tightening into an already weak economy” also presents concern, while Italy’s ability to rollover its debt is a risk, the institute said.

Rising geopolitical risks in the Middle East “could produce new oil price shock/supply disruption,” and Egypt is facing challenges including a possible currency crisis, the IIF said in the report.

To contact the editor responsible for this story: Blanche Gatt at bgatt@bloomberg.net

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