Get ready for Greece to leave euro, says Greenspan

By Ben Marlow, and Peter Spence 08 February 2015

Former Chairman of the Federal Reserve makes his prediction as Greece's new prime minister outlines plans to keep the country afloat

The former chairman of the US Federal Reserve, Alan Greenspan, has predicted that Greece will be forced to exit the euro, as European negotiations continue on the state of the country's debt. Photo: AP

The former chairman of the US Federal Reserve, Alan Greenspan, has predicted that Greece will be forced to exit the euro, as its new prime minister outlined plans to keep the debt-stricken country financially afloat.

In a bleak assessment of Europe’s future, Greenspan, one of the most influential policymakers of modern times, said it was “just a matter of time” before Greece dropped out, triggering the eventual collapse of the single currency.

His stark comments came just hours before Greek prime minister Alexis Tsipras told parliament he would on Wednesday ask fellow Eurozone members in Brussels for an emergency short-term bridging loan, to allow Athens more time to negotiate a new debt deal.

“The bail-out failed,” he said. “The new government is not justified in asking for an extension… because it cannot ask for an extension of mistakes.”

Mr Tsipras’s Left-wing Syriza party swept to power last month on a pledge to renegotiate the terms of Greece’s €240bn bail-out deal with the EU and International Monetary Fund five years ago.

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The financially-ruined nation has struggled under repeated rounds of austerity that have pushed unemployment up to 25pc, compared with the Eurozone average of 11.5pc.

With funds expiring at the end of February, time is running out for Athens. Greece must make $25bn of debt repayments this year.

Tsipras is pushing for a short-term financial fix enabling the country to pay its way while talks continue.

However, the new prime minister has a fight on his hands, with EU officials so far rejecting his efforts to renegotiate terms. On Friday, Jeroen Dijsselbloem, who chairs the Euro group of finance ministers, said Athens must either apply for an extension of its current bailout by February 16, to continue receiving financial assistance, or go it alone.

In a BBC interview, Mr Greenspan, who headed the US central bank for nearly 20 years, said “I believe [Greece] will eventually leave. The problem is that there is no way that I can conceive of the euro continuing, unless and until all of the members of Eurozone become politically integrated – actually even just fiscally integrated won’t do it.”

This weekend, several top academics, led by Scott Sumner, a monetary economist, warned Eurozone stimulus will be “too little, too late” to revive the bloc’s economy.

 

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Get ready for Greece to leave euro, says Greenspan - Telegraph