Greece Should ‘Default Big’ to Address Debt: Blejer

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http://www.bloomberg.com/news/2011-09-13/greece-should-default-big-to-address-debt-woes-argentina-s-blejer-says.html

Greece should default on its bonds to stop a deterioration of the economy, said Mario Blejer, a former Bank of England adviser who took the reins of Argentina’s central bank after its 2001 default on $95 billion.

“Greece should default, and default big,” Blejer, who was an adviser to Bank of England Governor Mervyn King from 2003 to 2008, said in an interview in Buenos Aires. “You can’t jump over a chasm in two steps.”

Rescue programs backed by the International Monetary Fund and European Central Bank are “recession creating” efforts that will leave Greece saddled with more debt relative to the size of its economy in coming years and stifle growth, Blejer said. A Greek default would push Portugal to do the same and would put Ireland “under tremendous pressure to at least symbolically default” on some of its debt, he added.

Blejer’s statements puts him at odds with German Chancellor Angela Merkel, who said the risks of contagion from a Greek default are too big and that an “uncontrolled insolvency” would further agitate turbulent global markets.