NEW YORK (Reuters) - Blackstone Group LP President Tony James, whose investment firm advised Greece’s lenders on a 206 billion euro debt restructuring, said on Thursday that the euro zone will have to expel Greece and Portugal in order to survive.
Debt-laden Greece, whose private creditors were advised by Blackstone on a haircut on their bond holdings last March, is now trying to convince its European peers, including paymaster Germany, that it needs more time to bring its finances on track.
“They will keep Greece in the euro for a while longer but eventually I think they will have to push Greece and Portugal out of the euro and protect the core of the euro some way,” James told a market conference in New York on Thursday.
“That will mean that Germany has to pony up and it means that other countries will have to subjugate their budget to the will of the European Union,” James said.
Euro zone officials were working on urgent measures on Thursday to ease financial market pressure on Spain and Italy, which are too big to bail out, as EU leaders began a summit deeply divided over how to resolve their debt crisis.
Many international investors have deserted Spanish and Italian debt, pushing yields to levels that Madrid at least cannot afford for long as it tries to save banks ravaged by a property market collapse and rein in an overshooting deficit.
“The crisis in Spain or Italy pushes them to the actual solution because they are too big to hide. How long (until there is a solution)? I don’t know, we are getting close,” James said.
Saving the euro requires fundamental changes which are challenging to implement because they need backing from 17 euro zone member countries, James said.
“There is political will to keep (the euro) together, clearly. I don’t think anyone wants to face the crisis today. I think they will continue to try to substitute liquidity for structural solutions,” James said.
Reporting by Greg Roumeliotis in New York; Editing by Richard Chang