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Greece's leaving euro 'worst option'
By Alessandra Rizzoand Dan Perry |
September 6, 2010, Monday
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Print Edition
Print Edition
EUROPEAN Central Bank Chief Jean-Claude Trichet said on Saturday that if Greece were to leave the eurozone and revert to the drachma, that would be the "worst possible option."
"We created the euro to achieve the single market for the prosperity and stability of Europe," he told a news conference at the Ambrosetti Forum, an annual gathering of political and business leaders on the shores of Italy's Lake Como. "The national governments have to take care of their own national competitiveness within the euro area."
European Union antitrust chief Joaquin Almunia said Greece is dealing well with the strict austerity measures demanded by other European nations and the International Monetary Fund in exchange for a massive bailout package extended earlier this year.
"I have full confidence in the reaction from ... Greek authorities, once the Greek package was agreed," Almunia said. "According to our reports, the implementation of this agreement is taking place in an adequate way," he said, also praising Greece's plans to restructure its banking system.
Greece has been trying hard to pull itself out of a debt crisis that nearly led to a default earlier this year. Athens sought help from the International Monetary Fund and the eurozone and is currently receiving rescue loans from a three-year 110 billion euro (US$140 billion) package.
The bullish comments by top officials stood in stark contrast to the perspective of most experts attending the conference.
Last Friday, University of Munich economics professor Hans-Werner Sinn said Greece's problems were long-term, outlining three options: the world can either subsidize Athens indefinitely; force an even greater degree of austerity that actually risks "civil war;" or encourage Greece to restore its drachma currency despite the domestic banking collapse that could well result.
Unlike Trichet, he suggested that Greece's leaving the euro - which would be very complicated procedurally and unprecedented - was the least bad option.
He also noted that bond spreads - the difference between the cost of borrowing for troubled countries such as Greece and solid ones such as Germany - have swiftly returned to the startling levels that preceded the Greek bailout in May.
New York University economist Nouriel Roubini argued that "a trillion dollar bailout has not patched things over," referring to the even broader package cobbled together by the IMF and EU four months ago.
"We created the euro to achieve the single market for the prosperity and stability of Europe," he told a news conference at the Ambrosetti Forum, an annual gathering of political and business leaders on the shores of Italy's Lake Como. "The national governments have to take care of their own national competitiveness within the euro area."
European Union antitrust chief Joaquin Almunia said Greece is dealing well with the strict austerity measures demanded by other European nations and the International Monetary Fund in exchange for a massive bailout package extended earlier this year.
"I have full confidence in the reaction from ... Greek authorities, once the Greek package was agreed," Almunia said. "According to our reports, the implementation of this agreement is taking place in an adequate way," he said, also praising Greece's plans to restructure its banking system.
Greece has been trying hard to pull itself out of a debt crisis that nearly led to a default earlier this year. Athens sought help from the International Monetary Fund and the eurozone and is currently receiving rescue loans from a three-year 110 billion euro (US$140 billion) package.
The bullish comments by top officials stood in stark contrast to the perspective of most experts attending the conference.
Last Friday, University of Munich economics professor Hans-Werner Sinn said Greece's problems were long-term, outlining three options: the world can either subsidize Athens indefinitely; force an even greater degree of austerity that actually risks "civil war;" or encourage Greece to restore its drachma currency despite the domestic banking collapse that could well result.
Unlike Trichet, he suggested that Greece's leaving the euro - which would be very complicated procedurally and unprecedented - was the least bad option.
He also noted that bond spreads - the difference between the cost of borrowing for troubled countries such as Greece and solid ones such as Germany - have swiftly returned to the startling levels that preceded the Greek bailout in May.
New York University economist Nouriel Roubini argued that "a trillion dollar bailout has not patched things over," referring to the even broader package cobbled together by the IMF and EU four months ago.
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