ECB ups pressure on Athens to step back from the brink


For followers of the chaotic events in Europe in recent weeks, Benoit Coeure's remarks that Greece could leave the euro may have sounded like a statement of the obvious.

But for the usually cautious European Central Bank, the comments from one of its top officials were a loaded political warning and the first of its kind from the ECB to Athens that its Prime Minister Alexis Tsipras is playing with fire.

The message, delivered by one of President Mario Draghi's most trusted allies in a French newspaper, may have sought to bring Athens back to the negotiating table it left last week.

On Tuesday, it emerged that Greece had submitted a new request for a two-year deal with its international creditors, a sign that communication channels remained open.

Despite Coeure's express desire that Greece stays within the eurozone, his public admission that it could go will be viewed with trepidation by many in Greece, where the economy depends on central-bank funding to keep going.

"A Greek exit from the eurozone, so far a theoretical issue, can, unfortunately, not be ruled out any more," Coeure told Les Echos, in the first public admission of its kind from the central bank that a country could leave the bloc.

Coeure's remarks, unusual because they weigh into a political debate that the ECB had sought to distance itself from, come at a time of frantic diplomacy to bring Athens back from the brink.

On Sunday, Greece will hold a referendum on the bailout terms offered by its creditors.

If Greeks vote "Yes" in the referendum for the aid package, Coeure said he had "no doubt" eurozone partners will find ways to meet commitments towards Greece. If the answer was "No", he said "it would be very difficult to resume political dialogue".

The statement from the ECB Executive Board member in charge of Greek negotiations laid bare grave doubts shared by other members of the six-person board about Greece's future in the currency. It also attracted criticism that the ECB was seeking to steer events.

That board – which currently includes appointees from Italy, Germany and France – last Sunday, had already told eurozone central bank chiefs to turn down a Greek request for billions of euros of emergency funding, prompting Greek banks to shut their doors and limit daily cash withdrawals to 60 euros.

"This is a very dangerous game that they are playing," said Paul de Grauwe of the London School of Economics, who criticized Coeure's remarks because they appeared to be aimed at shaping the outcome of negotiations.

"It is a problem that central bankers will make these hugely political decisions," he said. ECB officials play down any such influence and portray their role as that of 'technocrats'.

The eurozone crisis, however, has forced them to leave the sidelines and play a more active role in negotiations, European officials said.

The introduction of capital controls and a default to the International Monetary Fund threatens Greece's future in the eurozone, pointing to a fragmentation of the bloc that Draghi had said was indestructible in 2011.

"I have no doubt whatsoever about the strength of the euro, about its permanence, about its irreversibility," he then told the European Parliament, before promising the following year to do whatever it takes to protect the currency.

Critics now fear that this includes political interference.

"We want a monetary union to be embedded in a democratic system," said De Grauwe. "One where unelected officials take over is not acceptable." [Reuters]