by Calculated Risk on 11/25/2010 09:01:00 PM

From Michael Pettis on Europe: Chinese inflation and European defaults

Its official – Spain and Portugal will need to be bailed out soon. How do I know? In one of my favorite TV shows, Yes Minister, the all-knowing civil servant Sir Humphrey explains to cabinet minister Jim Hacker that you can never be certain that something will happen until the government denies it.

And Portugal and Spain have just rejected the possibility of a bailout (a joke with a lot of truth).

Pettis offers a few pessimistic predictions including:

Greece will be forced to default and restructure its debt, and the restructuring will come with a significant amount of debt forgiveness. The idea that it can grow its way out of the current debt burden is a fantasy.

And ...

Greece will not be the only defaulter. Spain, Portugal, Ireland, Italy, Belgium and much of Eastern Europe will also face severe financial distress and possible default.

Best wishes to all.