Greece: Economists forecast default

JEREMY HOBSON: The European debt crisis has taken another turn for the worse. The ratings agency S&P has lowered it rating on Greece’s debt — again. And now, a leading European economist is forecasting that some of Europe’s heavily indebted countries will default on their debt.

Marketplace’s Stephen Beard has the story from London.

STEPHEN BEARD: Greece is reported to be seeking another bailout. That’s on top of last year’s $157 billion rescue package. The Dow Jones news agency says the Greeks are expecting a further $85 billion in emergency loans. S&P’s downgrade — however — suggests that something more drastic might be needed. That Greece will have to default on some of the bonds that’ it’s issued.

Economist David McWilliams is a former official in the Irish Central Bank:

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

But the fear is that if Greece defaults in a disorderly way, then other heavily indebted countries that use the euro — like Ireland, Portugal and perhaps even Spain — might follow suit. That could trigger the second leg of the financial crisis in Europe.

In London I’m Stephen Beard for Marketplace.