Eurozone may need to sacrifice Greece, warns British minister

LONDON- Reuters

Students and young graduates visit a job fair at the Athens Technopolis, organized by technological firms and students organizations. Unemployment is one of the major concerns over the debt-hit Greek economy. AFP photo

Europe may need to sacrifice Greece’s membership of its single currency bloc in order to convince Germany to put in more money to save the euro, Britain’s finance minister George Osborne suggested in remarks certain to enrage euro zone leaders.

As the EU’s biggest economy and largest contributor, Germany holds the key to how the bloc can rescue its troubled, smaller economies and whether Europe is able to agree on a banking union to end 2-1/2 years of debt turmoil.

Britain and the rest of the European Union have clashed repeatedly over how to fix the crisis, with London refusing bluntly to take any part in any euro zone banking union.

“I ultimately don’t know whether Greece needs to leave the euro in order for the euro zone to do the things necessary to make their currency survive,” Osborne said in remarks published on Wednesday in The Times newspaper.

“I just don’t know whether the German government requires a Greek exit to explain to their public why they need to do certain things like a banking union, euro bonds and things in common with that.”
Despite its tough rhetoric, Britain is in an awkward position in its dealings with the EU because it is not a member of the euro zone, yet the fate of its economy is tied closely to the future of the single currency bloc.

Ahead of elections

A day earlier, Herman Van Rompuy, chairman of the EU leaders’ meetings, said the bloc would do all it can to keep Greece in the eurozone if it respects its bailout commitments.

Osborne’s comments came just days ahead of an election in Greece seen widely as a referendum on whether it should stay in the euro zone, or leave and go back to its old drachma currency. Eurozone rescue funds are already stretched by supporting Greece, Portugal, Ireland and now also Spain, after eurozone finance ministers agreed on Jan 9 to lend it up to 100 billion euros ($125 billion) to recapitalize its banks. A potential Italy bailout is also beign discussed.

Osborne - who had earlier urged the eurozone to use its bailout fund to recapitalize Spain’s troubled banks directly - described the deal as “too little, too late”.

“If you do it via the Spanish sovereign, then you are not going to convince the market the Spanish sovereign is entirely credible...and yet they went ahead down this route,” he said.