In a conference in Dublin late last week, Marshall Auerback of Colorado-based Madison Street Partners stated that Greece will default by the end of the year. The statement came after Greek Finance Minister Evangelos Venizelos said an orderly default may occur in the near future.
“I think it will default by December,” Mr. Auerback said. “That will give them enough time to have a plan in place to recapitalize the exposed banks and minimize the contagion.”
He then added that European authorities have the ability to help countries such as Ireland to avoid a similar fate. Explaining that the current approach will have no lasting effect, Auerback suggested that the ECB provide 1trn euro of newly created, debt free money to all Eurozone governments on the condition that it is used only to relieve government debt. This process should be repeated annually until the crisis is resolved.
Auerback conceded that this solution may pose political dilemmas, but argues that the current measure is more “moral” than economically efficient. He added that if left with no alternatives, Ireland may want to consider exiting the Eurozone, but only as a “nuclear option,” as repercussions would be damaging.