Greece Likely to Default Despite Germany’s Aim to Save Eurozone

Experts forecast that Greece is likely to default in the upcoming months despite German Chancellor Angela Merkel’s intention to keep the Eurozone intact.

MOSCOW (Sputnik), Svetlana Alexandrova — Greece is likely to default in the upcoming months despite German Chancellor Angela Merkel’s intention to keep the Eurozone intact, EU economic experts told Sputnik.

"I anticipate that Greece will proceed with its default, there will be no bailout," professor at the school of Oriental and Asian Studies (SOAS) at University of London Lawrence Saez told Sputnik.

Earlier in June, German Chancellor Angela Merkel stressed that the main goal of the lenders is to make everything possible to keep Greece in the Eurozone.

On Thursday, Merkel said there was a possibility of reaching an agreement with Greece on its debts in exchange for crucial economic reforms such as a reduction in pension benefits, an increase in the value added tax rate and the privatization of some state companies.

Merkel cited the example of Iceland, which, after defaulting on its obligations in late 2008, was able to carry out major economic reforms focused mainly on capital controls and currency devaluation, and now posts one of the highest growth rates in Europe.

Earlier this week, Greece's ruling Syriza party announced that failure to reach an agreement with its three biggest lenders, the International Monetary Fund (IMF), the European Union and the European Central Bank (ECB), would force Athens to follow an "Icelandic-style default" and to nationalize the Greek banking system.

Alan Marin, professor at the London School of Economics and Political Science, however, does not share the German Chancellor’s opinion that Greece will be able to copy the Icelandic default, pointing out that the starting points and overall conditions of the two countries are not comparable.

"The Greek debts at issue are government debts, not private bank debts as it was in Iceland’s case," he said, stressing that Iceland's recovery was linked to its exchange rate depreciation when in Greece's situation, even if it defaults on its debt, "it will try to stay in the Eurozone, so will not have an immediate improvement in competitiveness."

Athens and its three main creditors — the European Commission, the European Central Bank and the International Monetary Fund are attempting to reach a new agreement on Greece's debt before the expiry of its current bailout program on June 30. Negotiations between Greece and its international creditors earlier on Thursday failed to result in an agreement.

Greece's overall national debt currently stands at $350 billion, some $270 billion of which the country owes to the three of its major creditors.