Business World

Monday 22 January 2018

Rehn forced to deny plans for dealing with Greece euro exit

Donal O'Donovan

Donal O'Donovan

TENSION and confusion over Greece's possible exit from the eurozone reached a new high yesterday with two members of the European Commission at odds over whether plans were being considered to cope with a Greek exit.

Commission vice-president and economics chief Olli Rehn was forced to deny EU plans to deal with a Greek exit from the euro yesterday afternoon -- directly contradicting earlier comments by fellow commissioner, Karel De Gucht.

Mr De Gucht, the EU trade commissioner said earlier that the EC and the European Central Bank (ECB) were working on an emergency scenario in case Greece had to leave the eurozone, in a newspaper interview published yesterday.

"A year-and-a-half ago there may have been the danger of a domino effect," he said in an interview with Belgium's Dutch-language newspaper, 'De Standaard'.

"But today there are, both within the European Central Bank and the European Commission, services that are working on emergency scenarios in case Greece doesn't make it," Mr De Gucht is reported to have said.

The comments provoked a sharp rebuttal from Mr Rehn that was rapidly circulated by EU officials.

"Karel De Gucht is responsible for trade," Mr Rehn said. "I am responsible for financial and economic affairs and relations with the ECB. We are not working on the scenario of a Greek exit. We are working on the basis of a scenario of Greece staying in. We do not comment on speculative issues."

Mr Rehn's intervention was not enough to prevent the rising tide of panic in the markets however -- particularly after German finance ministry spokeswoman Silke Bruns said that country is making plans to deal with the potential of a Greek exit.

"People have the right to expect the government to make preparations for all eventualities," Ms Bruns said at a regular government press briefing in Berlin.

Markets have been in something close to free-fall since Tuesday, when Greece said it would hold fresh elections in June after returning a hung parliament in elections held almost two weeks ago.

The latest sell-off of shares has wiped out all of the year's gains on global stock markets, according to Reuters.

Greek officials added to yesterday's atmosphere of confusion, saying the German Chancellor Angela Merkel had called for Greece to hold a referendum on euro membership, alongside elections to be held on June 17.

However, a German government spokesman denied she had made such a proposal, which would be a bizarre reversal after she blocked a similar plan put forward by former Greek prime minister George Papandreou last year -- a move that effectively triggered the current electoral crisis in the country as a result.

Germany's outspoken finance minister Wolfgang Schaeuble said turmoil in the financial markets caused by Europe's debt crisis may last another two years.

Unsurprisingly, it means "risk-off" mode for investors.

On the markets, US and German borrowing costs fell, and gold rose, as investors took money out of risky investments and parked them in so-called safe haven investments.

In contrast, Brent crude oil -- a measure of confidence in economic growth -- slipped to the lowest price per barrel of the year and the euro hovered near a four-month low against the US dollar and Japanese Yen. (Additional reporting Reuters)

Irish Independent

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