IT’S only a matter of time before Greece goes bankrupt and leaves the euro, according to a top US economist.
Dr Irwin Stelzer, a senior fellow and director of Hudson Institute’s economic policy studies group, warned that Greece would be in better shape if it had its own currency and in turn it would strengthen the value of the euro,
Speaking to the Yorkshire Post during a visit to Leeds, Dr Stelzer said: “It’s only a matter of time before they (Greece) go bankrupt. They are bankrupt now, it’s only a question of how you recognise it and what you call it.
“Certainly they will default...maybe as early as March. If I were them I’d get out (of the euro). They would be in better shape if they had their own currency.”
He added: “If they (Greece) leave the euro, the euro would probably strengthen because it wouldn’t have this drag any more.”
Meanwhile, recent economic data from the US suggests that its economy has turned a corner.
“It does seem like we’re on the path to a slow but steady and sustainable recovery,” Dr Stelzer said. “We created 257,000 new private sector jobs last month, manufacturing is certainly turning up...exports are up, so I do think we’re on an up-tip. How strong it’s going to be, I don’t know, but we certainly seem to be in better shape than we were a year ago.”
Dr Stelzer said Britain was not yet clear of a double dip but he trusted Bank of England governor Mervyn King’s latest forecast that the country would avoid a recession this year.
He added: “But there is a problem. The unemployment figures are dreary. You have the highest unemployment rate in 16 years. For women it’s the highest unemployment rate in 23 years. For youngsters it’s off the charts.
“Whether you can keep enough consumer demand up in the face of all of that, I’m not certain, but I would defer to the Bank of England on this issue.” However, he warned that one of the biggest problems facing the UK and the US was the Middle East and threats by Iran to close the entry point to the Gulf if new sanctions were put in place to block its oil exports, a move which could cause a spike in oil prices.
“Right now, if the Israelis do decide they are going to put the Iran nuclear weapon out of business and if the Iranians decide to block the Strait of Hormuz I think oil prices will spike.
“But it would only be temporary because America has the military capability to clear the Strait of Hormuz quickly and the Saudis are willing to step up production,” he said.
He added: “It won’t be fun because we don’t know how the Iranians will react. That is a scary proposition and not only because of oil prices.”
Mr Stelzer was speaking to the Yorkshire Post during a visit to the region to rally support from the business community for a third runway at Heathrow Airport.
The call to action follows the publication of new research by economic analysts Oxford Economics on the vital role that aviation plays in supporting Yorkshire’s economy.
The research, launched today at a summit of 30 businesses convened by the Leeds, York and North Yorkshire Chamber of Commerce and BAA at law firm Pinsent Masons in Leeds, found that £3.3bn of Yorkshire’s exports move by air.
One in nine jobs in Yorkshire depend on foreign investment, while 3,800 jobs in Yorkshire’s tourism sector alone depend directly on Heathrow airport.
Capital expenditure at Heathrow brought in £80m for Yorkshire suppliers in 2010.
Mr Stelzer said: “If you add a third runway and a whole bunch of slots, it’s more likely that there will be room for better service to regional airports.”
Opinion & Analysis: Page 15