The threat of a Greek exit from the eurozone
returns centre stage this week amid a series of meetings by the
region's leaders, plus a warning Monday from a top European Central
Bank official of the economic upheaval if Athens left the euro.
In a series of media interviews, ECB Executive Board member Joerg
Asmussen said a Greek exit from the eurozone would be "manageable"
but "very expensive".
Asmussen's remarks came at the start of critical week in the
eurozone's long-running debt crisis with a series of top-level
political meetings marking the end of the summer holiday season in
Europe.
This includes talks between German Chancellor Angela Merkel and
French President Francois Hollande in Berlin on Thursday.
One day later, Merkel is to meet Greek Prime Minister Antonis
Samaras. The Greek leader is to hold talks with Jean-Claude Juncker,
who heads up the Eurogroup of finance ministers on Wednesday.
Setting the tone for the round of meetings were a string of
reports on moves by the ECB to end the eurozone crisis as well as on
the signs of the deepening scenario engulfing Greece.
The German weekly Der Spiegel reported Saturday that Greece will
need to slash its budget by 14 billion euros (17 billion dollars) in
exchange for international bailout funds. This is 2.5 billion euros
more than they had originally estimated.
The amount was raised in conjunction with an audit of the
country's finances by the so-called troika comprising the European
Union, the International Monetary Fund and the European Central Bank.
A spokesman for the European Commission said it was "too premature
for us to comment" on any extra efforts Athens will have to make.
"The troika will return in early September to Athens to make a
final assessment ... and on the basis of that assessment, it will
then be for the Eurogroup to draw conclusions," Simon O'Connor told
reporters in Brussels.
German Finance Minister Wolfgang Schaeuble was quick to rule out
boosting Greece's current 130-billion euro rescue operation, saying
"we cannot draw up a new plan." It was not possible to "throw money
into a bottomless pit," he said.
Elaborating on Schaeuble's comments, a spokesman for the finance
ministry told a regular press briefing Monday: "The conditions, the
timeframe and the total sum of money were fixed."
However, German Foreign Minister Guido Westerwelle hinted that the
time lost through two Greek elections this year could mean that more
flexibility might be necessary in enforcing the bailout plan.
In an interview with the German daily Frankfurter Rundschau,
Asmussen said his preference was that Greece should stay in the
eurozone.
But Asmussen said while a Greek exit would be manageable "it would
not be as orderly as some imagine".
Asmussen, who was Germany's deputy finance minister until taking
up his new job at the ECB at the end of last year, said a Greek exit
would cause a slowdown in growth, job losses and would be "very
expensive, in Greece, in Europe and in Germany".
His remarks also came against the backdrop of a renewed debate in
Germany about Greece possibly departing the eurozone.
If Athens failed to meet the conditions as laid down in its
bailout plan than then "there could no longer be a place for Greece
in the eurozone," said Hans-Peter Keitel, the president of the
Federation of Germany Industry said.
Another key issue facing European officials isthe plan outlined
earlier this month by ECB chief Mario Draghi for the bank to help
ease the borrowing costs faced by vulnerable eurozone states through
a new program of buying government bonds.
Asmussen said the ECB was currently working on the details of the
new program and it would be discussed at the Frankfurt-based bank's
next meeting on September 6.
In his comments, he also appeared to underline the tensions in the
bank over the controversial bond-purchasing program.
He said the German central bank, the Bundesbank, was not isolated
in expressing reservations about the ECB's reactivating its
bond-purchasing program.
However, he also said the new bond-purchasing program would be
"better conceived" than the previous one because it will operate
together with Europe's bailout funds.
A renewed round of intervention by the ECB in government bond
markets could include the bank placing a cap on the borrowing costs
of nations at the centre of the debt crisis such as Italy and Spain.
In a report, Spiegel said the bank would set an upper limit for
borrowing costs in heavily indebted states and then step into the
markets to ensure that they did not rise above the level.
But an ECB spokesman rejected the reports about a limit on
borrowing costs saying the issue had not been discussed and described
the reports as "misleading."
