Greece’s eurozone exit ‘manageable’ but expensive

FRANKFURT - Agence France-Presse

European Central Bank (ECB) Executive Board member Joerg Asmussen. REUTERS Photo

A Greek exit from the eurozone would be “manageable” even if it would be expensive and result in higher unemployment, a top member of the European Central Bank was quoted as saying yesterday.

In an interview with the Frankfurter Rundschau, Joerg 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 yesterday for a meeting with his German counterpart Guido Westerwelle to prepare the talks.

All eyes are on a key report from Greece’s creditors, known as the Troika, expected in September. The report will assess Greece’s reform progress demanded to unlock some 31.5 billion euros to keep the country afloat. On his foreign tour, Samaras is expected to discuss the possibility of having two more years to achieve the cuts.

Berlin has until now insisted that Athens must stick to the timeline and reforms agreed in return for its aid package. But mass circulation Bild reported yebterday that some concessions could be made to Greece within the agreed time frame.

‘No bilateral decisions’

Steffen Kampeter, a top finance official, told German radio the decision would be based not on requests from Athens but on the report of the troika, which comprises the European Commission, the ECB and the IMF.

“There will not be any bilateral decisions on Friday,” he said, referring to the meeting between Merkel and Samaras, “but decisions taken in an ordered, fair and transparent manner at the European level.”

In other comments, Asmussen reiterated the ECB’s position that it might buy the bonds of countries with soaring borrowing costs if they first apply for aid from the EU bailout fund and submit to tough conditions.

He said such a strategy would be “better conceived” than an earlier, disputed, program known as the Securities Markets Program (SMP), during which the ECB bought 211.5 billion euros of bonds, a move that held down borrowing costs.

The introduction of the program sparked the resignation of two German members of the ECB, Juergen Stark and Axel Weber, in protest at what they saw as an overstepping of the bank’s mandate to keep a lid on inflation.