Nouriel Roubini, the New York University economist who predicted the financial crisis, said Greece will probably leave Europe’s single currency within 12 months and could soon be followed by Portugal.
“The euro zone is a slow-motion train wreck,” Roubini said in a panel discussion in Davos, Switzerland today. “Not only Greece, other countries as well are insolvent.”
Roubini said he sees a severe recession in Europe and a 50 percent probability “that over the next three to five years the euro zone will break up.”
“Not all the members are able to stay,” he said. “Greece and maybe Portugal may exit the euro zone --Greece within the next 12 months. Portugal may take a while longer.”
Bondholders agreed with European officials three months ago to implement a 50 percent cut in the face value of more than 200 billion euros ($263 billion) of debt by voluntarily swapping bonds for new securities.
A worsening economy since then has made it more difficult to achieve a goal of cutting Greece’s debt to 120 percent of gross domestic product by 2020. An accord with bondholders is tied to a second bailout from Greece’s European partners and the International Monetary Fund for the country, which faces a 14.5 billion-euro bond payment March 20.
Greece and its private creditors said they made “important” progress during talks in Athens on a debt-swap accord needed to lower the country’s debt and pave the way for a second package of international aid.