EU in emergency talks over claim Greece will ditch euro
Published 07/05/2011 | 05:00
TOP-LEVEL EU finance officials were locked in emergency talks last night to avert a full scale euro crisis after reports Greece was on the brink of default.
The meeting was called to address what appeared to be a new threat that Greece could leave the eurozone.
The implications of such an unprecedented move would be serious for all countries in the single currency, including Ireland.
The Department of Finance here said they weren't aware of the meeting being held in Luxembourg and attended by officials from Germany, France, Holland and Finland.
Markets reacted nervously to the news -- first highlighted by a respected German magazine -- with the euro falling by most in a year against the dollar.
Greece has the most debt of any country in the 17-country eurozone and markets continue to speculate that it will simply have to default on its debts, known as a restructuring.
It is understood this is one of the options being presented at the meeting by German officials. If Greece defaulted it would mean huge losses for banks all over Europe and would also dent faith in the euro in other parts of the global economy.
The first report that Greece could leave the eurozone surfaced last night in German magazine 'Der Spiegel', although it was swiftly denied by the EU Commission, the German government and the Greeks themselves.
However, EU sources admitted an unplanned meeting was taking place and was being chaired by Germany, Europe's largest economy. The German magazine claimed the meeting was called after the Greeks threatened to leave the eurozone.
German Chancellor Angela Merkel's chief spokesman "categorically" denied that any discussions on Greece leaving were under way. But crucially, he decline to comment on whether the meeting was taking place.
"The costs of a euro exit would be too much for Greece and the euro zone to bear,'' said one senior trader last night. If Greece left the single currency, speculation could begin about Portugal and Ireland.
The euro debt crisis is now over a year old and still European politicians have failed to halt the sense of panic on markets.
The big problem remains in Greece, where its borrowing costs come to a crippling 26pc for money borrowed over two years.
Greece has about €330bn of outstanding debts, with about €22bn needing to be repaid this year alone.
It was only earlier this week that the package for Portugal was signed off by European officials.
The interest rate on its bailout loans has not even been agreed yet. A key meeting of EU finance ministers will take place on May 17th to decided on this.
Ireland is currently paying a 5.8pc interest rate, whereas the Greeks have a lower rate after agreeing to sell state assets.