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Europe slams report of Greek euro-withdrawal

The Local · 7 May 2011, 09:35

Published: 07 May 2011 09:35 GMT+02:00

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"Articles like this only serve to undermine the efforts that we have been making and help the speculators. We categorically deny this report," an official in the prime minister's office told AFP.

"This information is totally false," said a spokesman for the head of the Eurogroup of eurozone finance ministers, Luxembourg Prime Minister Jean-Claude Juncker.

The comments came after an article appeared on the online version of Der Spiegel magazine reporting that Greece had raised the possibility of such an exit during recent meetings and that it would bring the subject up again at a meeting in Luxembourg on Friday.

“There is no Eurogroup meeting taking place or planned this weekend," said Juncker's spokesman Guy Schüller.

Der Spiegel's article said that German Finance Minister Wolfgang Schäuble had travelled to Luxembourg for the Eurogroup meeting, which had been planned with upmost secrecy.

Neither Schäuble nor his ministry were not immediately available for comment.

Germany's public ARD television and the Wall Street Journal also said that a meeting had been scheduled.

According to the Wall Street Journal, the Luxembourg meeting will tackle aid for struggling Greece and Portugal and both the French and German finance ministers and Juncker will attend. But the paper added that the issue of Greece abandoning the euro was not on the agenda.

"Such articles are a provocation, sapping the effort of Greece and the euro and serve speculative games," said the Greek finance ministry.

The euro fell to 1.4375 against the dollar at 1800 GMT while it had been trading at around 1.45 before the publication of the Der Spiegel article.

Greek media also pointed to movements on the market for credit default swaps - insurance for investors against a default by Athens on its debt.

In Paris the French finance ministry would not deny or confirm the report but said the possibility of Greece leaving the eurozone was "totally imaginary".

France too poured cold water on the suggestion, which comes 10 days before the next scheduled talks among eurozone finance ministers in Brussels, at which Greece could seek a second easing of terms on last year's international bailout.

Greece and European officials have been pushing back against increasing market speculation that despite its €110 billion bailout last year Athens will need to restructure its debts.

Yields on Greek government 10-year bonds have leapt to over 15 percent and on two-year bonds to over 23 percent on the secondary market, indicating deep scepticism among investors they will be repaid.

Story continues below…

Greece has a crushing debt of about €340 billion, nearly one-and-a-half its annual economic output.

The EU-IMF bailout package for Greece and those for Ireland and now Portugal were supposed to remove all concerns about the solvency of the countries.

Der Spiegel's report also said that Schäuble's office had conducted a study of the consequences of a Greek withdrawal from the 17-member eurozone, which he brought with him to Luxembourg.

The study concluded that Greece's new currency would likely depreciate by 50 percent compared to the euro, making a debt restructuring inevitable and provoking capital flight from the country.


The Local (news@thelocal.de)

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Your comments about this article

11:30 May 7, 2011 by pepsionice
To make this simple....you've got third-rate country economically that probably should have never been allowed into the EU. The political forces of Greece realize that if you dump the Euro and saddle back up with old currency...the only criticism you generate is within your own country, and you deal with that. All this business of having to meet with various French or German or Italian finance experts....forced into listening to some various lessons of how things work in their country, probably bored the Greeks greatly.

I don't see a big deal here. The second part of this deal is where Ireland, Portugal, and maybe Spain.....start to review the same option. I'm guessing that they all have finance teams watching how this works in Greece. And back over in Germany and France....they are wondering if you only have six countries using the EURO....can it survive at the end? That's the real question.
11:39 May 7, 2011 by FredFinger
I suspect that the EU will bribe Greece to stay put, if the greeks walk the Germans know the whole thing is at risk. The greeks know whats a stake for the EU and if they play their cards competently they will quietly be compensated and the euro will remain secure. Who said you have to work for a living? You just have to have a good family.
12:00 May 7, 2011 by tallady
Greece's problems are massive. A very large devaluation of it's own currency would help Greece's economy, but the short-term impact of a Greek departure is unclear and could be highly destabilising. Over the long-term, it's not certain that Greece is better off outside the euro zone.

Greece has undergone a stringent restructuring causing some depositors to pull money from Greek banks, threatening the system with dissollution.

It is almost certain that Greece will not be able to meet it's commitments to repay the loans guaranteed by the EU bail out.

The road ahead for Greece is going to be very difficult ,with little to no social programs or support from the government resulting in a much lower standard of living and a lower quality of life compared to a few years ago.
12:49 May 7, 2011 by toemag
Let them go, if that's what they feel they need to do to ensure their own survival. Just one thing before they leave, the €CB loans have a 35% p.a. interest rate for none € countries, good bye.
13:05 May 7, 2011 by catjones
Whenever anything is ranked there is always something at the bottom of the list. Remove Greece and Ireland takes its place; remove Ireland...pretty soon Germany is the EU.
13:18 May 7, 2011 by toemag
@ Catjones

Germany may be paying the bills,, but they are not in charge of the madhouse.
13:23 May 7, 2011 by Englishted
Europe is indenial and I don't mean the river.


Europe is insane ,and I don't mean the river.
13:30 May 7, 2011 by toemag
A €uropean union was an insane idea from the start.
13:45 May 7, 2011 by euskept
Comment removed by The Local for breach of our terms.
14:32 May 7, 2011 by FredFinger
I tried to warn my german friends what the price would be if they gave up the Deutschmark. Well they went down the garden path anyway and they are continuing to pay the hefty. I wonder if there will ever be a point that the german electorate shouts ENOUGH!! Well, as Hitler proved, the germans can be lead almost anywhere their politicians want lead them whether the price be their savings or their culture.
16:32 May 7, 2011 by Chicago1996
I think that what a lot of people are forgetting is that the European Union is still a very young political body that needs several more generations to iron out its cultural, political, historical and linguistic differences.

There are going to be many growing pains along the way, and you¦#39;ll inevitably have countries here or there with flaws or grievances that need to be brought back into the greater fold. It will take time, it will be hard, it will be expensive, it will take a whole lot of compromise, but in the end it can and should be done.

Just take a look at the UNITED STATES of America. Isn't it nice to drive from one State to another without having to show a border patrol officer your passport or not have to bother with exchanging currency?(Same goes for Europe)…

Sure, there are problems in both Unions. How many times have I heard one American or another sarcastically declare that bankrupt States like California should be kicked out of the Union; or that all Illinois politicians are a disgrace to the laws America was founded upon since they can never seem to follow them themselves. But, in the end, could anyone ever wrap their mind around an America without California or Illinois? … I didn¦#39;t think so….

Anyway, all I¦#39;m trying to say here is that people need to start looking past the days¦#39; news headlines and revisionist peanut gallery commentaries, and start looking further into the future. Whenever you have a union or an alliance of any kind, you¦#39;ll always have disagreements and differing opinions along the way. That¦#39;s just a fact of life and quite healthy to some extent. As big as the debt crisis in Europe (or America for that matter) may be at the moment, this too will pass one day.
20:12 May 7, 2011 by Loth
European union, United states or whatever. If you have a central bank that manages the economy with a fiat currency using interest rates to make inflation then Deflation. Its a recipe for everything, at some point in time, to be ruined. Thomas Jefferson said those children of the ones who fought in the American revolution would one day live on the streets of the country their fathers fought for. if ever such a banking system was allowed to take over Americas economy. Well they took over in 1913. Fractional reserve banking or creating money out of thin air also works against the people over time with the banks ending up owning everything. Honest money with a 100 percent gold or silver standard. Along with honest banking (No fractional Reserve banking allowed) is the best for stable economies.
21:41 May 7, 2011 by Englishted
The above two comments are interesting .

@Chicago1996 is looking with rose coloured glasses,if you want to understand the problems of the E.U. with its 27 countries (not states) try it with one open up your border to Mexico because

"Isn't it nice to drive from one State to another without having to show a border patrol officer your passport or not have to bother with exchanging currency?"

Dream on.

@Loth well put answer and reflections on the root problem faced by many (if not all) countries when unelected bankers rule in pure self interest at the cost of society and eventually mankind.
22:01 May 7, 2011 by dcgi
The Greeks are a fickle bunch and love to cheat each other but hate being cheated themselves. Bottom line is they don't have the money to go back to the Drachma, add to that, the Greeks already know the bitter taste of being cheated out of more money when the currency changed the last time to the Euro and people were rounding up the prices on everything.

All in all, a currency change for Greece would be dire.
22:15 May 7, 2011 by Logic Guy
Well, for starters, many European citizens voted against the EU Concept.

But it was immorally forced upon them. If the government of a nation, which generally consists of a small group of people, are wrong, then the entire nation suffers. It is what happens when there is a disconnect between government and citizens.

I find it quite amazing in how stupid some humans are. You would think that at least one individual would have said "Hey, wait a minute, we can all hold onto our culture, currency and identity, and yet reap huge, financial benefits through trade and business agreements!"

What I'm saying here is very simple stuff.
22:17 May 7, 2011 by wood artist
Greek withdrawal from the Euro would cause everyone problems. However, the Greeks know that creating their own currency (again) won't change a darn thing. They either suck it up, or literally go down the drain.

They have created a state that cannot be sustained, and borrowing to get out of debt is like continuing to dig when you're already in a hole. It can't possibly fix anything. They may not want to hear it, but when their government and country completely collapse, it won't be because of the Euro, nor the actions taken and demanded by Germany, France, and others.

In short, Greece is in serious trouble, and unless they admit that and confront it, they're finished. It may well end up being the greatest fire sale ever seen, and ebay will make millions selling everything from homes to whole towns.

00:17 May 8, 2011 by Chicago1996
@ Englishted: You are probably not going to agree with me, but here is the way that I see it. The European Union started out being one thing when it was first created, and over the course of time has expanded into something else.

At the rate The European Parliament is passing laws and regulations on behalf of its European member "countries", the autonomy of each "country" is slowly being stripped away and diminished over the next 150+ years, to the point where they will no longer be countries per se, but member States (kinda like the US is now, which was part of my original point).

On top of that, if you add all of the various enclaves, exclaves, Euroregions, Eurodistricts and so on and so forth to the mix, you will quickly realize that you have a mess on your hands if you are of the anti European Union persuasion.

And as a side note, I also completely agree with everyone that says that Greece and other countries need to seriously overhaul their banking and financial system. That is a given. Where I differ with some people on, is the idea that member countries can just simply decide to leave the Union at will.

Greece needs to take responsibility for its past indiscretions and address its financial problems within the structure of the European Union. By not doing so, it would further hurt its own economy and reputation; not to mention all of the other member countries that are being hung out to dry.
08:02 May 8, 2011 by ChrisRea
Well said, Chicago1996!

The root of Greece's problems is in the internal structure (such as the tax collection system). Being out of the EURO zone will not help with addressing the real problems (by the way, the EURO zone is not the same as the European Union).

The European Union is a concept based on the idea that you cannot prosper in the long run while your neighbours suffer. So we support each other and, when our community is stable enough, we add a new neighbour as a member. As in any family, there will always be quarrels, but if there are well managed, they are a factor of progress.

The European Union already helped Greece. If Greece will choose to exit the EURO zone as an alternative to solving its internal problems, it would be a wise management decision from the European Union to stop helping and kick Greece out of the Union.
14:43 May 8, 2011 by Englishted
Stange but Chicago1996 I do agree with "The European Union started out being one thing when it was first created, and over the course of time has expanded into something else. " but it did so without the agreement of its people.

I don't and I don't know anybody who does, know who is there Euro M.P. so they are not answerable ,a great danger when they can over ride countries own parliaments.

If all the people in a land want to leave the E.U. are you saying they cannot ?,even if as in many cases they did not vote to join .

A economic grouping is one thing and on many points you are correct but to force change or do it by the back door is undemocratic one Frenchman and later one Austrian tried and look what happend.
20:28 May 8, 2011 by Al uk
Logic guy (15)

"If voting changed anything, they'd abolish it."
17:48 May 9, 2011 by EastPrussia
Why does Greece have the audacity to suggest a withdrawal from the EU, when the EU is the one saving their butts? They have a rotten ecnomic infrastructure, and I think the people here are right - Greece will never be able to pay Germany and France back (the ones who always finance bailouts).

It is time to see the writing on the wall, as they say. The EU would be better off without these countries that suck them dry and never repay debts. That only weakens the Euro as a whole, as far as I'm concerned.
23:32 May 9, 2011 by Logic Guy
Well, I must say that comment by Al UK is one of the most realistic and profound I've ever heard. It's a fact. As of this moment, the opinions / votes of "Everyday Citizens" are quite often "Hijacked" by corrupt and evil people.

Here is a very simple solution: ONLY vote for individuals who ARE NOT connected, in any way, to known, corrupt and evil organizations. If the citizens of nations, such as America, England, France, Holland and Germany were to do this in very, large numbers, then "Everyday Citizens" would gain control of their own nation.

The world as we know would change in an extraordinary way.

War would become obsolete.

Consistent peace, stability and prosperity would become the new reality.
22:01 May 10, 2011 by EastPrussia
I agree, but what if there are no alternative candidates that fit the criteria? It's a bad situation.
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