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“What has been happening is not sustainable,” he says. “We have to focus far more quickly on how to get the deficits down, because unless we do that, we cannot continually fund these things because it’s all being funded by printing money.”
Greenspan says that many of solutions have failed to address structural issues such as uncompetitive labour markets and high deficits.
“Most of the ‘successes’ in this problem have been finding ways of funding the deficits, not reducing them. As long as there are deficits…you are creating ever more debt and that is not projectable indefinitely in the future,” he says.
Greenspan’s remarks come as the euro zone’s sovereign debt crisis continues to worsen. Less than a week after the European officials tabled a 100 billion euro bailout for the country’s suffering banks, yields on its ten-year bonds topped seven percent -- the same level that forced Greece, Portugal and Ireland to request international rescues.
On Wednesday, Moody's Investor Service slashed Spain's sovereign credit rating by three notches to Baa3 -- putting it one level above junk.
And there are growing signs that Italy, the euro zone’s third largest economy, is the next focus for bond markets that have grown increasingly wary of solutions to the crisis. The yield on three-year bonds the country auctioned on Thursday shot up to 5.3 percent, the highest level since January.