Ex-IMF Chief Raghuram Rajan on "Containment"

http://globaleconomicanalysis.blogspot.com/

"One of the advantages of this long drawn-out crisis resolution process is that many private sector entities that were exposed to Greece have reduced their exposure," Rajan told reporters on the sidelines of an investment conference in Singapore.

"The extent to which banks in Europe are exposed to Greece is much more limited than it was, even say, six months or a year ago, and so the cost of a Greek default and restructuring could be absorbed by the banking sector," he said.

Rajan said a restructuring of Greece's debt looked increasingly probable as Athens lacked the political will to carry out widespread privatizations of state assets and budget tightening.

"If it (the debt restructuring) happens in a way that banks and markets are prepared for, even if not publicly but at least privately, it is very well containable," he said.

Containment Nonsense

The idea that restructuring will be contained to Greece is pure nonsense. Portugal and Ireland are on deck with Spain right behind.

What cannot be paid back won't, and that extends far beyond Greece.