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Greek euro exit would be 'manageable' says ECB

The Local · 20 Aug 2012, 12:45

Published: 20 Aug 2012 12:45 GMT+02:00

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In an interview with Monday's Frankfurter Rundschau newspaper, Jörg Asmussen, a German member of the ECB's Executive Board, was asked about the possibility of debt-wracked Greece being forced out of the eurozone.

"First: My preference is clear. Greece should stay in the eurozone. Second: It is in Greece's hands to achieve that. Third: A Greek exit would be manageable. Fourth: An exit would not be as orderly as some imagine," he said.

Such an exit would spark a slump in growth, job losses and would be "very expensive. In Greece, in Europe and in Germany," said Asmussen.

Asmussen's comments came at the start of a crucial week for Greece as it bids to persuade its European partners to release a further slice of aid to keep its economy on life support and enable it to stay in the 17-nation bloc.

Prime Minister Antonis Samaras holds talks with German Chancellor Angela Merkel in Berlin on Friday and with French President Francois Hollande the day after.

Greek Foreign Minister Dimitris Avramopoulos was in Berlin Monday for a meeting with his German counterpart Guido Westerwelle to prepare the talks.

All are waiting for a key report due in September from Greece's international creditors - the European Commission, the ECB and the International Monetary Fund - known as the troika.

The report will assess Greece's reform progress demanded to unlock some €31.5 billion ($38.9 billion) desperately needed to keep the country afloat.

On his foreign tour, Samaras is expected to discuss the possibility of having two more years to achieve the required cuts.

Berlin has until now insisted that Athens must stick to the timeline and reforms agreed in return for its aid package.

But Bild newspaper reported on Monday that some concessions could be made to Greece within the agreed timeframe.

Steffen Kampeter, a top finance official, told German radio there would be no bilateral decisions taken on Friday between Merkel and Samaras, "but decisions taken in an ordered, fair and transparent manner at the European level."

The German government also on Monday poured cold water on a reported plan by the European Central Bank to set a cap on the borrowing costs of debt-wracked eurozone countries, terming it "very problematic”.

"Purely theoretically and speaking in the abstract, such an instrument would of course be very problematic but I am not aware of any plans in this direction," said Martin Kotthaus, a spokesman for Germany's finance ministry.

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"You know that we basically do not comment on the ECB, which is an independent institution, but I can still say that I do not know about these plans," added Kotthaus.

Der Spiegel magazine reported on Sunday that the ECB was planning to set a limit on the borrowing costs of individual countries and intervene on the markets to maintain this level.

Spain and Italy have seen their borrowing costs shoot up during the eurozone crisis to levels that forced Greece, Portugal and Ireland to seek a bailout.

AFP/The Local/hc

The Local (news@thelocal.de)

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Your comments about this article

13:23 August 20, 2012 by smart2012
this is becoming so and so and so and so ridicolous... 28 Euros worth of money per each European person is destroying Europe and leading to a disaster.. and Merkel has been the lady who brought us here... well done Merkel! and Germans, if u keep reading BILD, we will have a ww3
16:28 August 20, 2012 by Englishted

And how much for Italy ,Spain ,Portugal, Ireland ,and the "new" European members when a little truth leaks out ?.
16:44 August 20, 2012 by smart2012
Actually Portugal and Ireland already went busted, and noone said anything. Tell me why Greece is such a critical thing?... because of huge German investements there....

If greece issue was addressed last year, today we would be talking about soccer. And what if France will go bankrupt, and what if Germany will go bankrupt... and what if... You see, you are destructive, and with this approach peiople like you are destroying Europe, and Germany.... Keep reading BILD
17:07 August 20, 2012 by Englishted

So €28 from everyone in Europe to support " huge German investments there"

you are having a laugh ,with as much chance as me reading the bild.
18:15 August 20, 2012 by smart2012
Yes my dear, 28 euros by half a billion european population equal 14 billion euros ie the money needed by Greece, and yes, money that Greece owns mainly to Deutsche bank, commerzbank, thyssenkrupp (2 submarines that cannot stay straight on the sea), siemens (train), Deutsche Telekom (owning Greek telephonic system).. Btw, one Greek politician is in jail as he was corrupted by siemens to make a big contract. For our sons, this is the great benefit of making deals with Germany (as it is governed now by merkel).. And the Greek affair is leading to a disaster. And yes, keep reading Bild
20:46 August 20, 2012 by cambiste

The population of the eurozone is approx 330 million.I suppose you expect those approx.170 million members of the E.U. who do not have the euro as their currency to contribute as well-that would be popular!Also you have said several times Greece leaving the eurozone would lead to ww3.Do you think Greece will bomb Berlin with i.o.u's and begging letters?

Greece should not have joined the eurozone and should now leave.
21:27 August 20, 2012 by PNWDev

Yes, smartguy does expect the non-participating Euro members to pay-up. It is his way to eliminate the 99% vs 1% division in favor of the everyone @ 50% mirage his heroes Stalin and Castro believed in.

As for what the Greeks will bomb Germany with and who will side where for World War III we will anxiously await - and have been waiting, for his answer on that one. That and Bild have been his talking points forever now.

But I do love the entertainment he provides.
23:14 August 20, 2012 by Berlin fuer alles
I dare say none of you know what you are talking about. No more than the powers that be. This is simply a case of damned if you do and damned if you dont.
00:56 August 21, 2012 by smart2012
Ops sorry we r talking about 42 euros per European person which is the cause of eu catastrofy.. Ah ah, just to recover silly investors which blindly invested in Greece (mainly German groups)..

Ww3 has nothing to do with Greece, Greece is only the sacred cow.. Ww3 will come if merkel/bundesbank will not stop behaving like cows instead of working on long term fixes for Europe (do u u guys realize that we have wasted 1,5 years in talking about greece rather than working on ways to be competitive with china/India/brazil/turkey/Russia/Dubai)??? ww3 will come when people will start to hate Europe, European neighbors, which is what it is happening now. And one of the cause of the ww3 will be religious, and in Germany u will have the spark.. As usual
09:53 August 21, 2012 by Berlin fuer alles
A country cannot be expelled from the euro under the existing treaties, and those treaties cannot be amended without the consent of all 27 EU states. This is no mere legalistic point. The EU has no police force to enforce the provisions of its treaties on those who have signed up to them. The entire existence of the EU rests on the voluntary acceptance of the rules laid down in the EU treaties by everybody. If this is called into question, as it would be if an attempt was made to remove a country from the euro, the whole basis of the EU itself ceases to have any meaning.
14:14 August 21, 2012 by schneebeck

I would like to ask a few questions about your "42 Euros/person" solution.

You wrote, "we r talking about 42 euros per European person which is the cause of eu catastrofy"

Are you claiming that the Eurozone's peoples reluctance to contribute 42 Euro's each to the Greek government coffers has caused the problem?

How would this idea be implemented? How would this money be collected? Would each Eurozone country multiply their population by 42 Euros and then be responsible for contributing that sum?

Would this money be "given" to the Greek Government, or loaned?

Would the Eurozone governments obtain this 42 Euros per person from their people by way of a specific tax?

In your opinion, would the people of the Eurozone be supportive of this kind of tax or angry about it?

Once this money, the 42 Euros per person in the Eurozone, was transferred to the Greek government, would this then finally correct all the administrative and fiscal shortcomings of the Greek government?

Would Greece no longer be a fiscal problem to the Eurozone?

After this 42 Euros per person was handed over to the Greek government? Would this be the "last" time that the Eurozone people would have to transfer monies to the Greek government?

I'm sorry about all the questions. Your idea just raised a lot of questions in my mind.
19:32 August 21, 2012 by 2ldr
I do not know smart2012's politics, and do not really care to learn them.

I do agree that this Greece being too big to fail is a bunch of BS. This debt that has Greece by the throat should be defaulted on. The people that let Greece borrow this money should just accept the fact they made a bad investment and move on. They did not lend that money to be altruistic. They lent Greece that money so that Greece would buy their products and pay them interest. There is risk involved in borrowing money and the tax payers should not have to cover the bets.

What happend in the U.S. is also wrong. They want to be capitalists until it involves the people with money losing money.

If there is any lesson the Germans should have learned after the World Wars it is not to leave a country under crushing debts. You back people into a corner and they will bite you when you want to deal with them the least. We do not need more people to die over money.
23:26 August 21, 2012 by smart2012
Guys, my 42 euros example was just claiming how silly populistic German press is (and verkel) to make a big deal of something (Greece) which is worth nothing, instead of focusing on the real issues eg fuel price and lost competition against china, India etc etc
01:33 August 22, 2012 by schneebeck
@ 2ldr #12

That was a really good post.
14:45 August 22, 2012 by jg.
@2ldr "This debt that has Greece by the throat should be defaulted on."

Yes - but they can only do that if they are out of the Euro.

"The people that let Greece borrow this money should just accept the fact they made a bad investment and move on."

When you see that French banks are into Greek sovereign debt to the tune of 90bn Euros, it becomes clearer why the French government is not at all keen for Greece to leave the Euro, default and start over again.
16:23 August 22, 2012 by Englishted
Hey I have a plan lets push a country until we get one third of the population below the poverty line and then for a joke make them impose more new austerity measures on the population and see what happens to that society.

Darn !!! they are already doing it .
17:36 August 22, 2012 by 2ldr
@jg -

I am waiting for them to admit all this money that the banks lent was retirement funds, or taxpayer bailout money.

You have to wonder if this delay before the default is just meant to allow them to shuffle their money around and make sure they are not the ones eating the loss.
07:09 August 23, 2012 by AlexR
Of course the Greek euro exit would be 'manageable' -now. For the last three years the banks that lent irresponsibly all those money to Greece (and the rest of the PIIGS), were quietly moving those "toxic assets" away from them. Were did all those "toxic assets" go? To the ECB, or better, to the rest of the European tax payers.

The billions of bailouts that Greece and the rest of the PIIGS have received, were effectively the mechanism to move those "toxic" assets from the banks to the tax payers. That's why now a Greek euro exit is 'manageable' according to ECB while two years ago was 'unthinkable' -again according to ECB.

@2ldr: "The people that let Greece borrow this money should just accept the fact they made a bad investment and move on."

It's not that simple. In the case of Greece, this could happen, since Greece represents only 2% of the economy of the Eurozone and the money they've borrowed are relatively not much. However, what they are really afraid is the so called "domino effect". Those banks, didn't make a "bad investment" in Greece only. They made the same "bad investments", and even worse, in Ireland, Spain, Italy, practically in every Eurozone country the last 10 years. If Greece defaults and the others follow this would be a nightmare scenario for those banks. And this is what they are afraid of the most. Not a Greek exit but a possible Spain/Italy exit.
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