Greece may need to default or leave the euro, warns former Reagan economist

749AM GMT seventeen March 2010

Martin Felstein believes that Greece might need to leave the euro

Mr Feldstein, who is a Harvard University economics highbrow and who was once a heading claimant to be authority of the Federal Reserve, pronounced that the alternatives to the necessity plan "are to default in a little approach or to leave [the euro], or both".

A "polite way" to default could embody pursuading investors to barter sappy holds for longer-term resources at less essential rates, or withdrawal the eurozone and returning when the predicament is over.

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Mr Feldstein"s comments protest the assertions of the European Central Bank"s president, Jean-Claude Trichet, who has claimed that Greece"s purgation measures are "convincing". But they relate the research of George Soros, who in Feb pronounced that the euro is "being exceedingly tested" and "may not survive" the Greek necessity crisis.

In a 1998 paper, Professor Feldstein argued that the "EMU would be an mercantile liability. A singular banking would means at majority small traffic and investment gains but would lift normal cyclical stagnation and would probably lift inflation, continue constructional unemployment, and enlarge the risk of protectionism".