Grexit would be 'beginning of the end' for Europe, warns EU chief

By Mehreen Khan Friday 13 March 2015

Greek prime minister insists on solidarity after Pierre Moscovici says "catastrophe" could emerge from strained debt negotiations

Alexis Tsipras called on Germany to repay Nazi war debts to Greece earlier this week Photo: EPA

A disorderly Greek exit from the Eurozone would mark "beginning of the end" for the currency union and spark a dangerous domino effect of market contagion across the continent, according to the EU's top finance commissioner.

Seeking to soothe talk of an "accidental" Grexit, Pierre Moscovici said any move to eject Greece from the bloc "would be a catastrophe - for the Greek economy, but also for the Eurozone as a whole."

"If one country leaves this (monetary) union, the markets will immediately ask which country is next, and that could be the beginning of the end," the former French finance minister told Der Spiegel magazine.

Mr Moscovici's comments come after days of fractious exchanges between Greece and its international creditors.

In the latest round of hostile words from Europe's largest debtor country, Germany's Wolfgang Schaeuble warned Athens' brinkmanship over implementing economic reforms could result in a "Grexident".

"To the extent that Greece is solely responsible and decides what is to happen, and we don't know exactly what Greek leaders are doing, we can't exclude it," said Mr Schaeuble.

The difference in tone from the European Commission and Berlin reflects a schism between Greece's creditors who have been split over the level of demands they wish to extract from the country.

Responding to the German rhetoric, Prime Minister Alexis Tsipras urged Europe to show solidarity with his country as it awaits the approval of a vital bail-out extension.

Striking a more optimistic tone, Mr Tsipras said: "we will find a solution because I strongly believe that this is our common interest.

"I believe that there is no Greek problem, there is a European problem."

Relations between the Leftist country and Germany have deteriorated after Mr Tsipras demanded the repayment of Nazi war reparations earlier this week.

Mr Schaeuble has also been the subject of an official complaint from Athens who accused the finance minister of making derogatory comments about his Greek counterpart Yanis Varoufakis.

But there were tentative signs of a thawing between the two sides, with reports suggesting Berlin was willing to stand down over its opposition to Greek plans to issue short-term debt to alleviate its funding crisis.

The European Central Bank has so far rebuffed Athens' requests to raise the ceiling on the issuance of Treasury bonds.

Instead the ECB has been drip feeding its emergency assistance (ELA) to Greece's banks which have suffered from rising deposit flight since Syriza came into power.

Wolfgang Schaeuble has been the subject of Greek complaints

In a further sign of stress among the country's lenders, Greece's Euro system funding reached a 13-month high of €104bn in February as banks became increasingly reliant on the ECB's emergency funds.

Bail-out funds worth €7.2bn have yet to be released to the cash-strapped government as creditors are pushing for further commitments to austerity and revenue raising measures in return for the cash.

Greece's central bank governor Yannis Stournaras warned the uncertainty risked "wasting the hard sacrifices" made by the country since it began implementing painful austerity in 2012.

Grexit would be 'beginning of the end' for Europe, warns EU chief - Telegraph