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Greek euro exit loses taboo status in Germany

May 16, 2012

BERLIN: “Akropolis Adieu!” screams the cover of the latest issue of the usually understated Der Spiegel news weekly, a sign that the topic of Greece leaving the eurozone is gradually becoming less taboo.

“Why Greece must now leave the euro,” the front page was subtitled, with a picture of a euro coin broken in two having fallen off a crumbled Acropolis pillar.

For EU paymaster Germany, as well as top European officials – even at the European Central Bank, the most ardent defender of keeping the bloc together – the prospects of a break-up appear less catastrophic than before.

German Finance Minister Wolfgang Schaeuble last week said that while Germany wants to keep Greece in the euro, it “can’t force anyone” and stressed that “Europe won’t sink that easily” if the eurozone were to split.

In another interview with Sunday’s edition of Die Welt, he said that it would be a “funny sort of government” if Berlin did not at least “prepare for all possible eventualities.”

Rather than sticking rigidly to keeping Greece in the euro, Chancellor Angela Merkel said on Monday it would be “better” for it to remain in the group, adding she did not think Athens would stop living up to its commitments.

And even members of the ECB – the guardian of the euro – appear to be more relaxed about Greece leaving, with Belgian central bank chief Luc Coene talking of an “amicable divorce” in the Financial Times.

Irish central bank governor Patrick Honohan has already said that a Greek departure from the eurozone “isn’t necessarily fatal” and could “technically” be managed.

Nevertheless Luxembourg premier Jean-Claude Juncker, presiding at a meeting of eurozone finance ministers in Brussels Monday, lashed out at “propaganda” suggesting that Greece would now exit the troubled currency.

“I don’t envisage, not even for one second, Greece leaving,” the head of the Eurogroup said after the Monday night talks.

As chaos reigns in Athens, with squabbling politicians unable to form a government following inconclusive elections, Germany is beginning to count the cost of a potential Greek exit.

Economists at Deka Bank have put the bill to the German taxpayer at some 86 billion euros (US$110 billion), assuming that Greece does not pay back EU loans of which Berlin stumps up the lion’s share.

When Germany’s contribution to the International Monetary Fund’s section of the Greek bailout package is taken into account, the tab rises to more than 100 billion euros – not to mention losses at German regional banks.

Private German banks could probably cope with a Greek exit, said Claudia Buch, one of the economists that advise the German government.

Most of the private German lenders “will certainly have written off a portion of the risks linked to Greece,” Buch told Monday’s edition of business daily Handelsblatt.

“Of course, there are other risks that are difficult to put a figure on. But on the flip side, this should not mean that we always need to help out every country every time,” she added.

According to the well-informed Spiegel, Germany – Europe’s biggest economy – feels strong enough even after a potential “Grexit” to continue paying bailout funds to the country.

As for the European Commission, its president Jose Manuel Barroso said he still “hopes and wishes” that Greece can remain in the eurozone but stressed that Athens must live up to its commitments.

Behind the scenes, the tone is tougher in Brussels.

“Brutal messages are being sent to Greece. We’ll see if that knocks some sense into the leaders of the Greek political parties,” one senior diplomat said.



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