IMF: Exit from euro could be orderly
Following the collapse of talks between the country?s political leaders on Tuesday and the decision for a fresh election to take place next month, the world appears to be warming to the idea of a Greek eurozone exit. The risk of the next government being reluctant to fulfill Greece?s bailout commitments, meanwhile, prompted the International Monetary Fund to suggest the country could ditch the single currency in an orderly manner.
?If the country?s budgetary commitments are not honored, there are appropriate revisions to do, which means either supplementary financing and additional time or mechanisms for an exit, which in this case must be an orderly exit,? IMF chief Christine Lagarde said in an interview yesterday.
?It is something that would be extremely expensive and would pose great risks, but it is part of options that we must technically consider,? she said.
?It is a severe setback for the urgently needed confidence in Greece?s readiness to reform,? German Foreign Minister Guido Westerwelle said. Greece cannot avoid ?tough and painful reforms,? he added.
His colleague, Finance Minister Wolfgang Schaeuble, warned, ?The fundamental question that the second program for Greece is about is agreed and not negotiable in its economic parts, and is not being negotiated.?
However, he added that ?if we can help with additional, bilateral measures, that is an entirely different question.?
Other finance ministers have also started contemplating a Greek exit, with Francois Baroin saying on Tuesday that France has lent 50 billion euros to Greece and that the nation?s banks can absorb Greek losses.
His counterpart, Jan Kees de Jager, said the Dutch government has studied the scenario of a possible Greek exit but insisted the aim is for Greece to stay in the common currency.
On the other hand, the president of the Eurogroup, Jean-Claude Juncker, described all talk of a Greek exit on Monday as ?propaganda,? while Charles Dallara, the head of the Institute of International Finance, admitted he is probably part of a small group that does not take Greece?s exit from the eurozone as a foregone conclusion.
?I believe that the cost to Greece, the cost to Europe and the cost to the entire global economy may still be enough to cause Greek politicians and European politicians to pause before they pull the trigger on a Greek exit,? said the man who negotiated Greece?s privately held debt restructuring earlier this year.
