The sovereign debt crisis will be solved by witholding funds from Greece and ejecting them from the euro, says Kames Capital fund manager Phillip Milburn.
Greek prime minister George Papandreou announced a referendum on the next bail-out package would be scheduled for next year.
Eurozone leaders unveiled plans last week to deliver a further £114 billion in bail-out funds to Greece as the private sector braces itself for a 50 per cent haircut on Greek government debt.
Milburn says Greece should not receive any further funding until they chose to leave the euro altogether as “they do not have the institutions in place to be a part of it”.
About 90 per cent of Greek government debt is written under Greek law which means it would be re-denominated under the drachma, says Milburn.
Separate Irish and Portugese defaults would then need to be forced through if a solution is to be found.
Milburn proposes that, in Ireland’s case, “for every two Irish bonds, investors would get a euro bond and an Irish Brady bond” instead, with a suggested term of 50 years.
Meanwhile, the European Central Bank would see the benefits of embarking on its own programme of quantative easing.
“With growth and a bit of inflation, this can all be solved”, says Milburn.
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