Europe could melt down in two weeks — three tops — and take the world down with it, IMF adviser and Harvard economist Robert Shapiro says.
The fate of the industrial world's economy lies in European policymakers' hands.
"If they cannot address [the financial crisis] in a credible way I believe within perhaps 2 to 3 weeks we will have a meltdown in sovereign debt which will produce a meltdown across the European banking system," Shapiro tells the BBC, as reported by Zero Hedge.
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"We are talking about the largest banks in the world, the largest banks in Germany, the largest banks in France, that will spread to the United Kingdom, it will spread everywhere because the global financial system is so interconnected. All those banks are counterparties to every significant bank in the United States, and in Britain, and in Japan, and around the world."
Greece has been teetering on the brink of default for a while now, and European officials have been working with the country to keep it in the eurozone via aid packages.
A default on its debts could damage the European banking system since banks across the continent are either directly or indirectly exposed to Greek debt.
U.S. banks exposed to Greek banks will feel the heat as well should Greece default and spark a crisis similar to the Lehman Brothers collapse in 2008.
"This would be a crisis that would be in my view more serious than the crisis in 2008," Shapiro adds.
European officials, meanwhile are scrambling to prepare their banking systems for a default.
"We are now proposing member states to have a coordinated action to recapitalize banks and so to get rid of toxic assets they may have," says European Commission President Jose Manuel Barroso, according to Reuters.