Monday 26 August 2019

Greece exiting the Eurozone now 'a real possibility'

Greek Prime Minister Alexis Tsipras. (Reuters/ Alkis Konstantinidis)
Greek Prime Minister Alexis Tsipras. (Reuters/ Alkis Konstantinidis)

Colm Kelpie

A Greek exit from the Eurozone is a real possibility, experts are warning.

A day after Greek prime minister Alexis Tsipras laid out plans to dismantle the country's austerity programme, rattling off a list of reforms he plans to reverse, the yield on Greek government bonds rose and stocks fell.

Eurozone finance ministers - including Michael Noonan - are due in Brussels for an emergency gathering tomorrow to discuss the way forward for the country, and listen to Greek minister Yanis Varoufakis in his first appearance before them.

The Greek government and Eurozone leaders have struck a defiant tone, with Mr Tsipras insisting his country would not extend its bailout and Germany saying it would get no more money without such a programme.

Eurogroup chair Jeroen Dijsselbloem has ruled out providing Greece with a bridging loan to keep the country afloat while it renegotiates the terms of its bailout.

Gary Jenkins, chief credit strategist with ING Capital, said the risk of a so-called 'Grexit' has now increased from 35pc to 50pc.

"It seems nonsensical that Greece could end up leaving the Eurozone because they could not agree with their European partners on the best way to get through the next few weeks to allow them to spend time negotiating, but that is a realistic possibility," he said,

"If Greece's partners finally feel that they are just throwing good money after bad and that the Greek government's demands are just too much, then it is likely that they will stick to the 'no extension - no bridge loan' mantra and watch as the financial situation in Greece starts to melt down.

"It is likely that there are some advisers to Ms Merkel whispering in her ear that to give in to Greece would only encourage the others and that maybe in losing Greece they save the Eurozone as a whole."

It comes just a day after Alan Greenspan, the former head of the US Fed, predicted that Greece will leave the single currency, saying the nation's crisis can't be resolved as long as it remains in the Euro.

But Mr Varoufakis said the Eurozone could collapse "like a house of cards" if Athens were forced out.

European Commission chief Jean Claude Juncker said a deal wasn't expected at tomorrow's meeting, or at the heads of government summit on Thursday and Friday.

"Greece should not assume that the overall mood has so changed that the Eurozone will adopt Tsipras's government programme unconditionally," Mr Juncker said.

Q&A: Greece

Q: Is a Greek exit from the Eurozone really possible?

A I wouldn't rule it out. It seems hard to imagine that European leaders would allow a country to leave the single currency, but events are moving so quickly at present, and with the language and positions so defiant on both sides, anything could happen.

Q What is the meeting tomorrow in Brussels about?

A Eurozone finance ministers have been called together for an emergency gathering to discuss the way forward and to try and make progress ahead of a meeting of heads of government on Thursday and Friday.

Q Is it likely that significant progress could be reached in the coming days?

A I wouldn't bet on it.

There has been little sign of compromise so far, but maybe, just maybe, when they're all locked in the same room, some progress can be made.

It's hard to see how, though, considering Greek prime minister Alexis Tsipras, as recently as Sunday, promised to dismantle austerity, seek a bridging loan to keep the country afloat and look to restructure debt. Senior Eurozone figures aren't backing that.

Q How urgent is it that a deal can be found?

A Pretty urgent. The bailout runs out at the end of the month, meaning the Greek government will effectively run out of money. And the country could run into trouble as early as March, when a repayment to the IMF falls due.

Irish Independent

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