EU working on emergency plan for Greek exit from euro

 

By Bruno Waterfield, Brussels 11:16AM BST 18 May 2012

The European Union is working on an emergency Greek exit plan as the break-up of the euro looms, a senior Brussels official has revealed.

The EU commissioner warned Greek voters that there was no room after a round of second elections for loosening the EU's austerity programme. Photo: AP

Karel De Gucht, the EU's Belgian trade commissioner, has told the De Standaard newspaper that the European Commission and the European Central Bank are confident the euro can weather the storm.

”A year and a half ago there may have been the danger of a domino effect,” he said. ”But today there are, both within the European Central Bank and the European Commission, services that are working on emergency scenarios in case Greece doesn't make it.”

Mr De Gucht indicated that the EU is apparently relaxed about bank runs and market turbulence hitting Spain, despite the financial turmoil this week.

”How much will it cost… I do not know, but it will cost money. What I am assured of is that there will be no contagion: a Greek exit does not mean the end of the euro,” he said.

Painting a grim picture the commissioner said that if Greece left the euro it was “finished” and that, while the euro would survive it would have to fight off a “cataclysm”.

”C'est fini. It (Greek exit) means that after a while you can no longer pay your officials who can no longer pay your pensions,” he said.

”All you can do is have your central bank to print money, and then you get hyperinflation. That would cause a cataclysm in other countries that are now under pressure.”

The commissioner warned Greek voters that there was no room after a round of second elections for loosening the EU's austerity programme that requires Greece to find an extra £9bn in cuts next month in returns for aid the country needs in order to finance its state.

”I would not speculate that Europe will bend after the elections. There is no margin. You'll barely have a reduction of the debt with the programme now on the table,” he warned.

He predicted: “I think that Greece will remain in the European monetary union. I do not know what the outcome of the new elections will be, but who knows, there may then be a third ballot battle. You would at some point also get a referendum on whether to withdraw from the monetary union, where the Greeks might vote in a totally different way.”

Rainer Bruederle, a former German economy minister, told the German Handelsblat newspaper: “Unlike two years ago, the eurozone today could cope with a Greek exit. It would cost a lot of money but it would be manageable. The decision, however, lies in Athens and not in Berlin.

"The Greeks themselves have to weigh up whether reintroducing the drachma would help their economic recovery more than staying in the eurozone.”

EU working on emergency plan for Greek exit from euro - Telegraph