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EU central bankers ponder Greece euro exit

The anti-bailout party led by Alexis Tsipras (right) came second in the polls

Europe central bankers have been openly expressing views on the possibility of

Greece leaving the eurozone as its leaders struggles to form a government.

Germany’s top banker

said it was up to the Greeks to decide, but if they did not keep to their bailout commitments, they

would receive no new aid.

His counterpart in the Irish Republic said a Greek exit would be

damaging but not necessarily fatal to the euro.

Greece is to make a final attempt at forming a

government on Sunday.

President Karolos Papoulias is to meet party leaders after they failed to

deliver a coalition through their own negotiations.

Greek voters punished mainstream parties

which backed the bailout at last Sunday’s parliamentary election.

If no new government is

formed, a new election will have to be held, and opinion polls suggest Syriza – a leftist, anti-bailout

party – will benefit most.

Syriza firmly rejects the terms of the most recent EU-IMF bailout,

which requires tough austerity measures in return for loans worth 130bn euros ($170bn;

£105bn).

‘Manageable’

On Saturday, German central bank chief Jens Weidmann said: “If

Athens doesn’t keep its word, it will be a democratic choice.

“The consequence will be that the

basis for fresh aid will disappear.”

“Start Quote

The anti-bailout party led by Alexis Tsipras (right) came

second in the polls

 

“We’re a

breath away from the drachma and disaster,” liberal Greek daily Kathimerini warned on Saturday,

referring to the country’s old currency.

Per Jansson, deputy head of Sweden’s central bank,

was quoted by Bloomberg as saying on Friday that central bankers across Europe had begun discussing the

possibility of a Greek exit from the eurozone and how to handle the consequences.

“I would be

very careful in speculating that it would be a painless process without complications,” he said in

Stockholm.

Irish central bank chief Patrick Honohan told a conference in the Estonian capital

Tallinn on Saturday: “It [a euro exit] is not imagined in the legislation, in the treaties, but things

can happen that are not imagined in the treaties.”

“Technically, it can be managed,” he

added.

“It would be a knock to the confidence for the euro area as a whole. So it would add to

the complexity of the operation until things settle down again. It is not necessarily fatal, but it is

not attractive.”

Speaking at the same conference, EU Economic and Monetary Commissioner Olli

Rehn was quoted by Bloomberg as saying Europe was “certainly more resilient” to a possible Greek exit

than it had been two years ago when it would have been “massively under-prepared”.

“I still

believe that Greece can stay in the euro and find the way to make sure that it respects its

commitments,” he said, adding Greece would suffer more than Europe if it left the euro.

Final

bid

After Greece’s three biggest parties – the centre-right New Democracy, far-left bloc Syriza

and socialist Pasok – each failed to form a government, President Papoulias called them to a meeting on

Sunday.

He will also hold talks with fringe parties including Golden Dawn, an extreme

right-wing, anti-immigration group.

Analysts say the president’s bid is unlikely to succeed

because the parties are so divided over the bailout.

Syriza leader Alexis Tsipras said on Friday

he could not join any coalition that intended to implement the bailout deal.

“The bailout

austerity has already been denounced by the Greek people with its vote, and no government has the right

to enforce it,” he said.

Analysts say Syriza could be hoping for another election after one

opinion poll put them in first position in any new ballot, albeit without an overall

majority.

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