Greece on brink of euro exit
Embattled country could be forced out by Germany as it lurches towards default on €1.5bn debt and economic meltdown
GREECE was last night on the brink of economic meltdown as Germany appeared poised to push the country out of the eurozone.
With Greece set to default on a €1.5billion (£1.1billion) debt repayment, senior German politicians warned that “enough is enough”. London’s FTSE 100 yesterday slipped 1.1 per cent to a three-month low as investors reacted to Greece’s failure to reach a deal with its creditors.
Global oil prices also fell after negotiations collapsed after just 45 minutes on Sunday, amid fears that Greece is now heading towards financial catastrophe.
As the crisis intensified, it emerged that George Osborne, the Chancellor, will later this week chair an emergency meeting as ministers seek to protect Britain’s economy from a potential Greek exit from the single currency.
Officials want to ensure that the Government has “contingency plans” in place to ensure that UK businesses are not damaged by a Greek withdrawal.
“Clearly there are difficult decisions to come,” a senior Government source said. “Understandably, the Government is doing everything it can to protect British interests.” The Prime Minister’s official spokesman yesterday urged eurozone countries “to find a solution” to the crisis at a summit to be held this week.
In a bid to appease Tory backbenchers further, the Government last night pledged not to hold the in-out referen- dum on the same day as elections to the Scottish Parliament and Welsh and Northern Irish Assemblies in May next year.
MPs were concerned that holding an early vote, which could have been overshadowed by regional elections, would increase the chances of a “yes” vote to remain in the EU.
Despite condemnation from European leaders after talks broke down, Alexis Tsipras, the leader of the Left-wing Syriza party, said it was up to international creditors to “turn to realism”.
“We will patiently wait until creditors turn to realism,” he said. “We have no right to bury the European democracy in the land where it was born.” He claimed that the talks collapsed because European creditors want to slash Greek pen- sions and workers’ wages. Mr Tsipras’ claims were immediately rejected by the European Commission.
Guenther Oettinger, Germany’s EU Commissioner and a senior member of Angela Merkel’s Christian Democrats, said that Europe should brace itself for a “state of emergency” in Greece from July 1 if Athens does not reach an agreement with its creditors.
He said: “We should work out an emergency plan because Greece would fall into a state of emergency. I think that the Commission needs to work out a plan that could avert a worsening of the situation in the event that Greece leaves the eurozone, in the event of a bankruptcy.”
Other senior figures in Mrs Merkel’s party queued up to criticise the Greek leadership. Volker Bouffier, the deputy party leader, condemned Mr Tsipras’ demands as “completely unreasonable”.
And Julia Kloeckner, a member of the party executive, said the Greek leader was “overplaying his hand”.
Sigmar Gabriel, the head of Germany’s centre-Left Social Democrats, who has been more sympathetic to the Greek position, said that time was running out for Mr Tsipras’ government. “Everywhere in Europe, the sentiment is growing that enough is enough,” he said.
Mario Draghi, the president of the European Central Bank, refused to say what the consequences would be if Greece misses any repayments. However, he said: “A default is unchartered waters. We have all the tools to manage the situ- ation as best as we have done in other situations, perhaps less dramatic.
“The consequences in medium to long term to the union is not something we are in a position to forsee.”
Shares in Greece tumbled, with some bank stocks falling by more than 10 per cent. Eurozone finance ministers will meet on Thursday and attempt to agree a solution to the crisis.
Mr Tsipras has been locked in negotiations with Greece’s creditors – the European Union and the International Monetary Fund – for five months in the hope of securing the release of €7.2 billion in rescue funds. Business: B1
he Greek debt crisis is now five years old, and still there is no workable settlement in sight. One apparent denouement follows another, lending Europe a sense of permanent crisis and conflict, not so dissimilar to an outright war, at least in terms of the entrenched positions and the vitriol of the language.
While much weightier matters, such as mass unemployment, the influx of illegal immigration, and the sabre-rattling at European borders from Putin’s Russia, go unaddressed, tiny little Greece has become an all-consuming diversion, monopolising the time and energies of political leaders and tearing at the very heart of the European project.
For Greece, it is increasingly obvious that there are no good outcomes to be had. It’s either default and leave the euro, which would lead to significant further economic short-term hardships, or carry on with the penury imposed by its European and other international creditors. So far Europe has refused meaningful debt forgiveness. Greece’s Syriza-led government has similarly refused the reform agenda demanded by the hated Troika, believing it an affront to its democratic mandate.
Enough is enough. The two positions cannot be reconciled, and though there is scope for spinning out this interminable saga for a while longer yet, it is time to bite the bullet and find a way of organising Greece’s exit from the euro in as orderly a fashion as possible. We advocate such a course with a heavy heart, for although this newspaper has always recognised the political and economic folly of European Monetary Union, once the step to abandon one of its members is taken, there is no turning back. Nobody can know the geopolitical, never mind the economic consequences, not just for Greece, but for the rest of Europe as well.
For Greece, stuck precariously on the fringes of Europe between often hostile and covetous neighbours, membership of the euro is about much more than economics and exchange rates. For many Greeks, it is about security and modernity. It’s a hard thing to let go, despite the damage done to them.
This is why, when it comes to separation, it must be done with a velvet glove, with Marshall Plan type aid to ensure Greece does not descend into economic and political chaos, and with help from the European Central Bank and the Bank of England in setting up a new, national currency. Other European governments must reconcile themselves to big haircuts in devalued drachmas. Regrettably, the growing acrimony of the present standoff makes the alternative of a bad exit all too likely. Yet whichever way it’s done, it’s hard to see any other way forward. This debilitating charade has gone on quite long enough; it’s time for Greece to take back control over her economic destiny.