Open Europe blog
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Greece considering eurozone exit?
Breaking news from Der Spiegel online suggesting that Greece is considering leaving the eurozone. According to the article a secret emergency meeting of eurozone finance ministers have been called.
From the article:
SPIEGEL ONLINE has obtained information from German government sources knowledgeable of the situation in Athens indicating that Papandreou's government is considering abandoning the euro and reintroducing its own currency.
Alarmed by Athens' intentions, the European Commission has called a crisis meeting in Luxembourg on Friday night. In addition to Greece's possible exit from the currency union, a speedy restructuring of the country's debt also features on the agenda. One year after the Greek crisis broke out, the development represents a potentially existential turning point for the European monetary union -- regardless which variant is ultimately decided upon for dealing with Greece's massive troubles.
Obviously, if there is any truth to the rumour, this is a huge turn of events. We’re still sceptical since it seems a bit out of the blue, but plenty of big events have been so we’re definitely still waiting with bated breath for more details. What's clear is that in the long-term, there's no way that Greece could have sustainable economic growth inside the Single Currency (it would need permanent subsidies).
The euro has already started dropping on the news, suggesting it may have started filtering through to the markets.
The commission and the German government have also issued responses denying the rumours - unsurprsingly quick off the draw for once.
If they were to leave, especially with such short notice and lack of planning, the fallout wouldn’t be short of financial chaos. Expect massive bank runs in Greece, money flowing away from the euro, a huge Greek devaluation probably leading to a default due to the massive increase in Greek debt. In the long-term, it may be inevitable, however. What was that we’ve been saying about having a plan in place for such an occurrence…?
By Open Europe blog team