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Top economist predicts Greek exit in five years

The Local · 18 Jun 2012, 14:18

Published: 18 Jun 2012 14:18 GMT+02:00

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Speaking to the Handelsblatt business newspaper, Commerzbank's Jörg Krämer said that even with a pro-European, coalition government, Greece would not be able to swallow an austerity programme in the medium term.

The conservative New Democracy party narrowly won Greek election on Sunday. It is being urged by European politicians, including German Foreign Minister Guido Westerwelle, to form a coalition government with the socialist Pasok party. Both parties are in favour of Greece accepting a further bailout.

The turn in Greek politics has been somewhat of a relief to politicians and economists as it edges out the far left Syriza party.

But Krämer believes that in the long run, the population of Greece will back neither reforms nor the cost-cutting measures that would come with a further bailout from the eurozone.

“If the eurozone states do not want to lose their international credibility, they will at some point have to cut Greece off,” he told the paper. “Greece will then quickly become bankrupt.”

A Greek exit from the common currency would not mean that the rest of the eurozone will crumble though, said Krämer. He believes that “the euro will survive because the political and economic elite depend on its existence.”

The eurozone could turn into more of a transfer union, he said, as even after a Greek exit, stronger euro states would support weaker ones.

“This would weaken the currency union as a whole because the inevitable increased tax burden would reduce the incentive to work and invest. Inflation will clearly rise, because the European Central Bank has moved too close to the finance ministers, and is releasing too much money into circulation,” he said.

Story continues below…

Greece has been forced to seek bailouts twice already, first for €110 billion in 2010 and then for €130 billion this year, plus a €107-billion write-off of private debt.

The Local/AFP/jcw

The Local (news@thelocal.de)

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Your comments about this article

16:40 June 18, 2012 by Bushdiver
That isn't news. I don't think the Greeks will be using the Euro a year from now. The Germany have practically begged the Greeks to stay in the EU. Why? The German and French government hold most of the Greek debt and Germany is intent on throwing more money away before they finally realize that there's no hope.
19:05 June 18, 2012 by AlexR
It's quite funny that the chief economist at Germany's second largest bank says that "the euro will survive because the political and economic elite depend on its existence".

A chief 'elite' economist, admitting that the 'elites depend on the existence of euro'. That's rich. And a first.

He is rather optimistic though. Most of the economists give Greece 6-12 months to exit the Eurozone and some give 1-2 years of a complete Eurozone collapse if things don't change drastically. Greece is just 2% of the EZ economy. Spain and Italy are much bigger and they are next. And this is where the big game begins -and ends.
07:29 June 19, 2012 by hildmountain
High thought comment through here that top economics said Greece will no longer be using the euro in five years time. Really it is exciting news.best banksThanks!
15:41 June 19, 2012 by DOZ
Horsefeathers. Never underestimate the Greeks. They may scream and stomp their feet, but they are far from stupid. They are not about to look a gift horse in the mouth. Right now their Pride is bruised and they will make sure it doesn't happen again.
07:53 June 20, 2012 by mos101392
History will show it was the greedy banks that led to the death of the euro!

It's all about Greed!

Now it's countries not individuals at the mercy of the banks!

If Germany and Europe were so concerned about keeping the beloved euro together, they would offer these bailouts with low interest or interest free.

If Greece and Spain are having issues now, do you think it will get better with more loans at even higher rates? The best thing that could happen to all those greedy bankers is for Ireland, Portugal, Spain, and Greece to default on those billions and leave the euro....they'll do ok, just look at England!

Take the money and RUN!
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