Europe slams report of Greek euro-withdrawal

Author thumbnail
7 May, 2011 Updated Sat 7 May 2011 09:35 CEST
image alt text

European officials strongly denied a report published on Friday that Athens was considering pulling out of the single currency area and going it alone with a currency of its own.

"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.

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.




2011/05/07 09:35

Please keep comments civil, constructive and on topic – and make sure to read our terms of use before getting involved.

Please log in to leave a comment.

See Also