Greece may have to restructure or default on its debt in future years — despite its $150 billion bailout deal and the $1 trillion Eurozone rescue package put together last weekend.

That was the message from sovereign debt expert Jonathan Lemco at an investment conference in Hamilton yesterday.

Dr. Lemco, who is a principal and senior analyst in the Vanguard Taxable Credit Research Group, said history showed that huge amounts of money was not a remedy for serious fiscal problems.

"The degree of Greece's problem is several times worse than Portugal or Spain's and the market remains very sceptical that this $1 trillion will be enough," Dr. Lemco told delegates at the Vanguard Bermuda Investment Forum at the Fairmont Hamilton Princess.

"How much is enough? One lesson from history is that you can't just throw money at a fiscal problem. There's not enough money in the world and it leads to moral hazard. You can't assume that they can sustain this level of support.

"If you want to resolve the problem, the austerity measures that have been imposed must continue — you have to cut public sector wages, you have to cut pensions, you have to raise taxes."

He added that the Greeks had a "terrible problem" in that even if they stuck to the austerity measures, there was little evidence they could grow their way out of trouble.

Tourism, which had been hit badly by the downturn, was the Greek economy's main revenue earner, he said, and apart from some shipping and agriculture, there was little else to drive growth.

The International Monetary Fund sees the Greek economy continuing to shrink, with GDP forecast to fall by 4.6 percent next year and for flat growth from thereon.

"I think with the rescue package, Greece will be fine in 2010 and 2011, but beyond that there is a significant chance of debt restructuring and default," Dr. Lemco said.

The European crisis had thrown the future of the single European currency into question, he added. Dr. Lemco believed the euro would survive, but that the Eurozone would need to embed more coordination into its constitution and achieve closer political ties to overcome national interests.

Dr. Lemco said the latest figures on debt to GDP ratios suggested that emerging economy governments were showing more fiscal prudence than those of developed countries.

He highlighted the cases of the US, whose debt is forecast to reach 99 percent of GDP this year, the UK (83 percent) and Japan (223 percent). He contrasted this to China (16 percent), Brazil (59 percent), Russia (nine percent) and Mexico (29 percent).

Credit rating agencies were increasingly inclined to upgrade emerging markets debt towards investment grade, Dr. Lemco added. He pointed out that an added factor of emerging economies' fiscal strength was their foreign currency reserves, which dwarfed those of developed countries.

While the global economy was showing signs of recovery, the "elephant in the room" remained the fiscal situation and the lingering high rate of unemployment, for example in the US (9.9 percent) and Spain (more than 20 percent).