Exit from euro ‘an accident that could happen’
Finance Minister Gikas Hardouvelis warned on Tuesday that the prospect of a eurozone exit is not out of the question but an “accident that could happen,” and outlined the five major problems that the country’s economy will come up against if the creditors’ assessment is not completed in time or if Athens is not granted another extension to the bailout program.
The minister told Bloomberg Television that the possibility of a departure from the eurozone “is not necessarily a bluff,” adding that it is “an accident that could happen and our effort is concentrated on avoiding it.”
He also noted that the main challenge of the next government will be the completion of the creditors’ inspection, and called on main opposition SYRIZA – if it forms the backbone of the next administration – to reverse its positions and negotiate an extension to the bailout program.
He went on to estimate that the election cycle has already bruised the state budget, as the 2014 primary surplus will amount to 1.5 percent of gross domestic product, against a target of 1.8 percent, which represents a shortfall of some 600 million euros. Without the completion of the bailout program within an acceptable deadline, the cost for the country would “grow beyond proportion.”
The first problem to emerge will be the loss of 7.2 billion euros – that being the bailout tranche dependent on the last assessment. That loss “would render the operation of the state much more difficult” claimed Hardouvelis.
The other problems that will soon become apparent are the return of the 11.4 billion euros at the disposal of the Hellenic Financial Stability Fund, the country’s isolation from the markets without a safety cushion, and the halt to the usual liquidity that the European Central Bank supplies to Greek lenders, which in November amounted to 45 billion euros.
The last major problem, according to the finance minister, will be that it will become virtually impossible for Greek banks to enter the ECB’s quantitative easing (QE) program. “Greece will miss the boat of easy financing which the other member states of the eurozone will be using,” Hardouvelis warned.
