European debt crisis exaggerated: Sachs

NEW DELHI: Panic over high debts of some European nations that led to a bloodbath in the global stock markets last week is exaggerated, as they are unlikely to default, said renowned economist Jeffrey Sachs here on Sunday.

He, however, cautioned against the “politically powerful bankers”, to avoid a repeat of the global financial crisis that has shaken the world over the past 18 months, leading to large scale unemployment and crippling of many an economy.

“I am not too impressed by this panic. I think Spain, Greece, and Portugal are solvent. I think they are credit worthy ... this (panic) will go away in a few weeks,” the Columbia University economics professor told PTI. Of late, investors have been apprehensive of the debt crisis spreading from Greece, where public deficit has reached 12.7% of GDP, to other Eurozone nations.

These concerns have hurt the confidence in the euro, which was evident from the euro’s crash against the US dollar on Friday, hitting a seven month low. Sachs, however, said the euro is in no danger and is going to be around as a competitor to the American greenback.

“I don’t think the euro is about to collapse. I don’t see any real break. The euro as a currency will remain a solid currency and as an alternative to the dollar, a competitor to the dollar. I see that continuing in a healthy way,” he said.

Commenting on the European markets, he said there is a wave of panic right now, which “is exaggerated”, and that the European nations are working on to solve the problem.

“From my discussions with the political leadership in Europe, there is an adjustment going on, and there is an absolute determination to stand behind the euro,” Jeffery Sachs said.

“It is a typical phase where the markets get agitated, then the pundits write stories, then the markets get more agitated, then the pundits write more stories, and I find these as waves of concern that can, in the worst case, lead to self-fulfilling panics,” said the Columbia economist.