Europe Economy

Europe Should Learn From Uruguay: Bill Rhodes

European policymakers grappling with problems in Greece, Portugal, Ireland and Spain should follow the path set by the Uruguayan government a decade ago, dealmaker William Rhodes told CNBC Thursday.

A protestor throws a stone to riot police in front of the Greek Parliament.
Photo: Aris Messinis | AFP | Getty Images

Timing is key," Rhodes said. "Paul Volcker taught me this lesson: you don't have all the time in the world, and you've got to get your act together quickly."

"When Greece first came on the scene almost 18 months ago I warned European policymakers that Greece was not going to be an isolated example and used Latin America as an example."

Rhodes, an ex-vice chairman of Citigroup , headed a series of advisory committees representing international banks during debt-restructuring negotiations in Latin America in the 1980s and 1990s.

He has just published a book called Banker to the World: Leadership Lessons from the Front Lines of Global Finance and still works as a senior adviser at Citi, where he has worked for more than five decades.

"Bring in the private sector as soon as possible," he said of Europe's problems.

You have got to show that there's a plan for growth because people will not buy into endless austerity, and the Greek people haven't," he added.

The Greek government last week passed a new series of austerity measures as part of a second bailout by the IMF.

"The problem with these stop gap measures is that you are buying time but for what?," said Rhodes.

"If there's no plan for growth then that's a problem."

"One of the big problems in Europe is that you have the ECB and politicians going at each other," he said.

"All that does is undermine the programme you have put in and undermine the markets."

The sovereign debt crisis in the euro zone has continued to unsettle markets this week, with the downgrade of Portuguese debt to "junk" by Moody's on July 5 increasing fears that the problems in Greece could spread elsewhere.

The Brady plan, which allowed struggling Latin American countries to issue new bonds with longer maturities, backed by US treasurys, "was done in different circumstances," he said, adding that the policymakers were just dealing with banks in that case.

With the PIGS (Portugal, Italy, Greece and Spain) countries, "it's not just the banks that hold the debt," he pointed out.

"When you have a more diversified bond base, you have to do things a bit differently."

Uruguay after the "Argentinean debacle" of 2001-02 was the closest comparison Rhodes could find to the current situation in Europe.

In that case, there was a bond exchange, where bond maturity was pushed back by five years.

"This meant that the government of Uruguay was able to implement its program," said Rhodes.

"The IMF wouldn't give any money until the banks agreed to it, and we got 95 percent of holders."

He added that part of the problem was that markets move "in nanoseconds" at the moment.

"When we started in the 1980s, and even in the Asian crisis of 97/98, the markets were there, but they didn't move in nanoseconds."