July 5 (Bloomberg) -- The Greek debt crisis will persist if euro-zone policy makers don’t “get realistic” and focus on a long-term approach instead of short-term gimmicks, according to Columbia University’s Jeffrey Sachs.
Greece is taking actions to service its debts, stay in the euro and avoid a financial or banking panic. Its European counterparts aren’t taking the appropriate steps, said Sachs, a Columbia professor and the author of “The End of Poverty: Economic Possibilities for Our Time.”
“The European Commission, the European Central Bank and the International Monetary Fund have so far been saying, ‘here, take a little bit and get back to the markets in 24, 36 months’ -- that’s not going to happen,” Sachs said on Bloomberg Television’s “Surveillance Midday” with Tom Keene. “So either we have a real, longer-term framework, or Europe is going to find that it can’t push Greece any further.”
EU leaders have asked investors to shoulder part of the latest aid package for Greece after last year’s 110 billion-euro ($159 billion) rescue failed to contain Europe’s debt crisis. Participation by Greek banks and pensions funds is important to the success of a plan for investors to roll over as much as 30 billion euros of maturing bonds into longer-term securities.
“Right now, we’re on a short-term rollover basis, which is very unrealistic,” Sachs said.
Portugal’s long-term government bond ratings were cut today to Ba2, or junk, from Baa1 by Moody’s Investors Service. The outlook is negative.
Greek Prime Minister George Papandreou last week won the backing of his country’s parliament to implement the 78 billion- euro austerity package needed to qualify for further financial assistance from the European Union. Greek citizens rioted in the streets, protesting the austerity measures.
Christine Lagarde, who started today as managing director of IMF, should say there will be no more short-term gimmicks and force a discussion of a long-term fix to Greece’s debt problems, Sachs said.
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