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Former IMF managing director John Lipsky on what's next for Greece and the fiscal cliff.
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-- -- -- Well it overseas news disappointment that Euro -- leaders once again failed to agree on the terms the latest round of aid for a floundering -- one of the world's top economist that was in Naples Florida.
At the CME global leadership forum and -- claimant has snagged him to find out what's next for both Greece and -- the fiscal -- let us.
You know -- you and Dennis were just showing that the currency effects and you saw that the Euro was weaker today some of that has to do with these questions that continue to swirl around the eurozone.
Particularly Greece we have a lot to talk about here -- John Lipsky.
Former IMF managing director former chief economist for JPMorgan Solomon Brothers it's great to have you here and Fox Business exclusive.
Let's hit the thickness first and that is will get to the fiscal -- and -- -- except for a lot of people want to know about but.
The news that Greece today was able to raise enough money at least for the moment to avoid -- -- yet again.
Yet another term little bit of -- -- disagreement here and there between Christine Lagarde to head -- the IMF.
And -- Claude junker who is of course one of the big eurozone spokes people when it comes to finance about how we deal with Greece.
What is the answer John.
-- -- -- -- The Greek authorities as you saw just adopted this through their parliament.
The austerity program that they had agreed with the troika so it seems hard to imagine that in those circumstances when the Greeks had done what they were being asked to do.
That they would be allowed to to face a default.
So they garnered enough short term support nonetheless.
For the program to continue.
For Greece to continue to be able to draw on the financial support of the so called troika Europe and the IMF.
There's gonna have to be an agreement.
Over the program over adjusting the program from the troika.
And it's obvious from what we saw yesterday publicly that that agreement still has not been -- -- -- going to have to take a haircut when it comes to the death that.
Greece Osama remember private sector creditors have already.
Had to write down of their holdings of Greek sovereign debt.
That one of the key questions because -- for the IMF to move forward -- required by the membership.
That they can show that at the end of the program countries in the sustainable position including debt sustainability.
And that's one of the issues that -- currently swirling.
Indeed did one question is will will -- public sector holders and other European.
Public institutions have to write down their holdings of Greek debt they clearly don't want to even though they're willing to.
Give them lower interest rates and longer terms at some point John -- -- -- -- -- -- jettisoned from the eurozone.
This is a decision ultimately that the Europeans.
Themselves the eurozone members would have to reach.
Right now it seems clear that the Greek government is.
-- responding to the demands for underlying structural reforms in -- way that hasn't in the case in the last few years.
It seems difficult that their partners would not cooperate at a time in which they.
Our and let's shift to the fiscal cliff what do you believe John but the White House and congress will reach an agreement.
That -- avoid the fiscal cliff.
It seems most likely the it's clear that.
The US economy would face real risks.
At a time and we'll -- At a restaurant -- -- how many job losses what we get our credit rating notch cut down while it's it's it's hard to be too overly specific about and the exact about such such a thing but you can imagine.
We've heard a presentation here just this morning that the the fiscal cliff would entail an increase.
In fiscal drag on the economy equal to 5% of GDP.
Figures can differ -- but it's obvious that it would be a significant negative for the economy that was -- administration recession probably.
If there was some sudden increase in an unexpected increase in that in tax rates and tax burdens.
Simultaneous significant cutback in -- in spending.
Disruption of the Medicare and -- payment system it's hard to imagine once again that the congress administration.
Would allow that to occur.
As we finish up do you have faith in this country because we started to see some decent economic data housing auto sales retails sales -- just a little bit better.
But let's not just a matter of faith I think if if we analyze the situation -- see that.
For many reasons the near term outlook for the US economy I suspect as a favorable one I think that more favorable from the consensus.
Assuming among other things that there's a reasonable solution to the near term fiscal challenges and some other for other factors.
But the medium term outlook for the US economy is very bright -- -- I'm very -- what I wanna end on that stage I think that's it we're not gonna get much better than that John Lipsky former.
Managing director of the International Monetary Fund it's a pleasure to have you here.
At the CME in global financial leadership conference thank you so much thinking and speaking about global leadership you guys coming up at 3 PM eastern he has launched more billion dollar businesses than anyone on the planet.
It both good times and bad sir Richard Branson.
Of the virgin group and Terry Duffy the CME group executive chairman as the host of this event.
Boy did he come out swinging against the government that he says it's making it too difficult for him to run its business -- -- all that more starting at 3 PM eastern live from Naples Florida share on land.
