Greenwood predicted Portugal would be the next to leave the common currency, with state, company and household debt pushing the country into default. The economist also pointed out that Greece was technically already in default – "a 50 per cent haircut is, in effect, a default" – and unit labour costs in "uncompetitive" Italy and Spain were 25 per cent more than in Germany. "If those countries had their own currencies, they would devalue them by that factor", he added. "But they would also have to reduce wages and prices by 25 per cent in the coming years."
Greenwood also argued that the eurozone had only itself to blame for the current crisis, as the southern European states, since the inception of the common currency, had effectively been able to borrow at German rates.
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