Eurozone in crisis management mode for Greece vote

With pressure building against Spain and Italy, eurozone officials already in crisis management mode are racing to ensure the single currency can withstand the results of Sunday?s election in Greece.

Brushing aside warnings that Greece faces exit from the euro if it fails to honour the terms of its massive international bailout, all the main candidates are clamouring to renegotiate, lending mounting credibility to nightmare scenarios.

Already mid-week, EU sources had said finance ministers from the 17-nation eurozone might hold a conference call as soon as the outcome emerges of the Sunday vote. That was dismissed by a Eurogroup official on Friday.

But Europe?s leaders will coordinate their response to Greece?s elections when G20 leaders gather in Los Cabos, Mexico, for talks June 18 and 19.

Senior European officials also said contingency planning in the case of a Greek exit included how to respond should cash-strapped Athens issue IOUs to meet salaries and bills while awaiting to reintroduce the drachma.

?That does not mean we are aiming for this specific scenario,? a source told AFP just days after reports that Brussels was mulling withdrawal limits on Greek bank ATMs and wider electronic capital controls, ?We have prepared technically for all realistic scenarios, even the unthinkable, as you would expect from responsible officials,? said a senior EU source.

One aim of a coordinated response from eurozone nations would be to spell out a joint position on events in Athens to avoid capitals talking out of turn ahead of the start of trading on Monday.

That problem occurred days ago when Austria?s Finance Minister Maria Fekter speculated out loud that Italy might be next after Spain to go look for help.

?Totally inappropriate?, said Prime Minister Mario Monti.

?We need a line,? an EU official told AFP this week.

Also on the cards is a possible intervention by central banks if needed, brokers said in London on Friday.

Greek radical leftist leader Alexis Tsipras, seen as a likely winner in Sunday?s elections, has set himself a 10-day deadline to renegotiate an EU-IMF bailout which he claims is killing the country?s weakened economy.

In an interview with state television this week, the leader of the Syriza party said he wanted to ?re-examine and replace? the loan agreement with another blueprint to stabilise the economy, wracked by a five-year recession.

But the country?s partners have warned this will lead to ?Grexit?, the shorthand term analysts and traders have adopted for a Greek exit from the euro.

?If the Greeks do not respect the conditions fixed to get their public finances back on track, Slovakia will join other (eurozone) states demanding Greece exit the eurozone,? Prime Minister Robert Fico said Thursday.

French President Francois Hollande issued a similar warning the previous day.

But anger over the conditions of the rescue runs high in Greece.

While New Democracy leader Antonis Samaras presents himself as the guarantor for Greece?s membership in the eurozone, he too wants to renegotiate harsh pledges of austerity tied to the ?memorandum? — or bailout deal.

Samaras this week won the support of several Socialist MEPs who called on the eurozone to ease deficit targets for Greece next year.

And several EU sources have said work is underway to examine how to relieve Athens.

?We could introduce some flexibility,? said one source while insisting there can be no reneging on the substance of the deal, which calls for structural reforms such as cuts in the civil service and lowering the retirement age.

Hollande also tried to reassure Greeks that Europe would stand by them, saying he had lobbied to speed up the release of EU funds to help the country return to growth.

But he warned: ?I am in favour of Greece remaining in the eurozone, but Greeks should know that this requires there be a relationship of trust.? ?The abandoning pure and simple of the (bailout and austerity) memorandum would be seen by many eurozone members as a break up. [AFP]

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