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Sunday 25 September 2016

EU will make Trojan efforts to keep Greece inside its walls

Published 27/05/2015 | 02:30

European Commission President Jean-Claude Juncker (R) greets Greece's Prime Minister Alexis Tsipras before the Eastern Partnership Summit session in Riga, Latvia. Photo: Reuters
European Commission President Jean-Claude Juncker (R) greets Greece's Prime Minister Alexis Tsipras before the Eastern Partnership Summit session in Riga, Latvia. Photo: Reuters

It's been often said during the interminable negotiations between Greece and its creditors that there is no Plan B.

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As deadlines draw near, negotiations turn into crisis talks. The focus shifts to what would happen if no agreement is found and Greece is potentially forced from the single currency.

But Brussels may not be stretching the truth too much when it stresses there is no alternative plan. No doubt some provision has been made, but Greece's creditors don't want to countenance a Greek withdrawal.

The comments from Pierre Moscovici yesterday suggest the powers-that-be will ultimately do whatever it takes to keep Greece in the single currency.

When it was suggested it would be irresponsible not to have a Plan B, the former French Finance Minister signalled that he believed a Grexit would damage the very nature of the euro itself, the assertion that as a currency, it is irreversible.

If that truly is the belief, it seems inconceivable that the European Commission, the IMF and the ECB would stand by and allow the very act that could precipitate a withdrawal to take place - default. Market analysts don't buy it either.

Goodbody economist Juliet Tennent told this newspaper last week that Greece and the Eurozone will work out some form of compromise deal, even though the country itself has raised the prospect of default on a series of IMF payments due next month in the absence of a deal to release bailout cash.

Signs of a creative solution emerged yesterday. Reuters reported that the solution could be to let Greece pack all its June IMF payments into a lump sum later in the month, allowing more breathing space for a deal to be devised,

Although it would likely prompt a negative market reaction, if a lump payment was to come later, it would not constitute a default.

But don't forget that even if a deal is found in the coming weeks, Greece's long-term funding remains problematical. Talks on that are scheduled to finish by the end of June, but they are not supposed to start until the discussions on the short-term deal are concluded.

Brussels may find itself having to fend off questions about a Plan B for some time to come.

Irish Independent

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