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Greek debt levels spark more Eurozone fears

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Kai Ryssdal: The ratings agency Standard & Poor’s is doing that thing it does to sovereign debt — European sovereign debt, specifically.

S&P has once again cut its credit rating on Greek government bonds. Greek debt is now six notches deep into junk bond territory. There’s no small amount of talk that Athens is going to need a second bailout from the European Union. It would be its second, and that might not be the end of it.

From the European Desk in London, Marketplace’s Stephen Beard has more.

Stephen Beard: Greece has received $158 billion in bailout loans. Now we’re told the country needs another $86 billion. But a leading European economist says even this enormous sum won’t be enough. David McWilliams, a former official in the Irish Central Bank, says Greece just can’t pay its debts. Default is inevitable.

David McWilliams: There has never been — ever in the history of monetary economics — a country that has got out of a massive debt, banking crisis without a default.

The trouble is, if Greece defaults or renegotiates its debt, other heavily indebted countries linked together in the Eurozone will likely follow suit. Here’s Andrew Hilton of the CSFI think tank.

Andrew Hilton: The Irish will demand the same and they’ll probably get it. And then the Portuguese will demand the same and they’ll probably get it. So there will be rolling defaults, rolling re-schedulings, rolling re-arrangements, you can call them what you will.

And that could mean huge losses for European banks. In this climate of fear and confusion, one report suggested that Greece may pull out of the Euro. But Matina Stevis of the Greek newspaper Eleftherotypia says that would be financial suicide for Greece.

Matina Stevis: Consumers like you and me would rush to ATMS to get their money out before the country converted back to the old currency, which is the drachma. That would probably mean a collapse of the domestic financial sector and banking sector.

In fact, she says this grim possibility may have been floated to make a second bailout for Greece or even a default sound positively appealing.

In London, I’m Stephen Beard for Marketplace.

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