The uncertainty surrounding peripheral euro zone countries' public finances has driven sovereign bond yields sharply higher, and many analysts believe a restructuring of Greek debt is now inevitable.

"Clearly Greece, and also Ireland and Portugal are going to restructure their debt," Buiter, a former member of the Bank of England's Monetary Policy Committee told delegates at a conference in Edinburgh.

Restructuring would initially take the form of maturity extensions, he said,

Spain, which Buiter said was a 'light' version of Ireland with sovereign exposure to the banking sector but to a far smaller degree than in Ireland, could yet be forced into a bailout as a result of contagion from a Greek debt restructuring or due to larger-than-expected capital needs for Spanish banks.

A solution to the latter could be to allow the European Financial Stability Fund to recapitalize banks directly, like the Troubled Asset Relief Program (TARP) in the United States, he said.

"If Spain were to stumble, in all likelihood the facilities would not be large enough," Buiter said, referring to the funds available under the European Financial Stability Fund or EFSF. "Expect fiscal austerity fatigue and bailout fatigue."

Belgium and Italy, which also have high levels of public debt, should be able to avoid being pushed into a bailout however, providing no major disappointments on economic growth and speculative withdrawal of market funding.

New leadership at the European Central Bank could prove a catalyst for debt restructuring, Buiter said.

ECB President Jean-Claude Trichethas said a restructuring of Greek debt is "not in the cards" and that Portugal's bailout should stabilize markets.

But Mario Draghi, who is widely expected to succeed Trichet at the helm of the ECB, "is more pragmatic about it," Buiter said.

A feasible solution to the crisis would be the creation of a "fiscal Europe", Buiter said, in which euro zone countries would lose their fiscal sovereignty, but that was "not going to happen".