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Rogoff Says Europe ‘In Denial’ on Debt Restructuring

Harvard University Professor Kenneth Rogoff
Harvard University Professor Kenneth Rogoff said, “we’ll be very lucky to avoid restructuring” in countries such as Greece, Ireland and Portugal. Photographer: Munshi Ahmed/Bloomberg

Dec. 6 (Bloomberg) -- Europe’s debt crisis will probably result in bond restructurings in Greece, Ireland and Portugal even as policy makers say they have the weapons to avert default, Harvard University Professor Kenneth Rogoff said.

“They can’t just be in a state of denial,” Rogoff said in a Bloomberg Television interview today. “They’ve tried to guarantee everything, to say, ‘Well, Germany is behind it and the IMF is behind it, it’s inconceivable for a euro-zone country to restructure.’”

“We’ll be very lucky to avoid restructuring” in countries such as Greece, Ireland and Portugal, he said.

European finance chiefs hold a monthly meeting in Brussels today amid disagreements on whether the region’s 750 billion-euro ($1 trillion) rescue fund needs to be increased to stop the debt crisis from spreading after Ireland agreed to tap the aid package last month.

German Chancellor Angela Merkel and French President Nicolas Sarkozy have rejected the idea, and Rogoff said that Merkel has been “talking sense.”

The chancellor has been saying, “We have to look ahead to the end game -- there’s going to be a debt restructuring, how are we going to deal with it?” Rogoff said. “But nobody else wants to talk about it.”

‘Pathetic’ Stress Tests

The former chief economist at the International Monetary Fund also said the bank stress tests carried out in Europe in July were “really scary” and “pathetic.”

“We were told everybody is fine, there is nothing to worry about,” said Rogoff, whose 2009 book “This Time Is Different,” co-written with Carmen M. Reinhart, charts the history of financial crises in 66 countries. “Now their credibility is less than ever.”

“I hope that the story of 2011 is we start to see a bit more healing in the global economy,” Rogoff said. “Europe’s a story of 2011, 2012, 2013. We will be seeing this sovereign debt game unfolding for a long time, but hopefully within the context of a more stable recovery.

To contact the reporters on this story: Sara Eisen in New York at; Fergal O’Brien in London at

To contact the editor responsible for this story: John Fraher in London at

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