Breaking news from Der Spiegel online suggesting that Greece is considering leaving the eurozone. According to the article a secret emergency meeting of eurozone finance ministers have been called.From the article:
SPIEGEL ONLINE has obtained information from German government sources knowledgeable of the situation in Athens indicating that Papandreou's government is considering abandoning the euro and reintroducing its own currency.Obviously, if there is any truth to the rumour, this is a huge turn of events. We’re still sceptical since it seems a bit out of the blue, but plenty of big events have been so we’re definitely still waiting with bated breath for more details. What's clear is that in the long-term, there's no way that Greece could have sustainable economic growth inside the Single Currency (it would need permanent subsidies).
Alarmed by Athens' intentions, the European Commission has called a crisis meeting in Luxembourg on Friday night. In addition to Greece's possible exit from the currency union, a speedy restructuring of the country's debt also features on the agenda. One year after the Greek crisis broke out, the development represents a potentially existential turning point for the European monetary union -- regardless which variant is ultimately decided upon for dealing with Greece's massive troubles.
The euro has already started dropping on the news, suggesting it may have started filtering through to the markets.
The commission and the German government have also issued responses denying the rumours - unsurprsingly quick off the draw for once.
If they were to leave, especially with such short notice and lack of planning, the fallout wouldn’t be short of financial chaos. Expect massive bank runs in Greece, money flowing away from the euro, a huge Greek devaluation probably leading to a default due to the massive increase in Greek debt. In the long-term, it may be inevitable, however. What was that we’ve been saying about having a plan in place for such an occurrence…?
6 comments:
You're right, it would certainly be a "huge turn of events." A big jolt for sure to the economy globally.
I see they are already denying it and say the Spiegel report is wrong.
My question is, if they were to go to a new currency what would it be?
For the sake of the people of Greece I hope their government will no longer let itself be bullied by the europrats who are only interested in saving face and not in what is good for Greece. Greece should probably have been allowed to leave the single currency a year ago instead of being loaded with more and more debt - including shelling out for Ireland and Portugal.
Bring back the Drachma
It's time, inevitable and it would have plenty of advantages, economically and in terms of democracy, that Greece, Portugal, Spain and Italy join their rather long-history partner countries from the other side of the Mediterranean. Creating a Mare Nostrum Union, with one currency, but with a modular, subsidiary relevant geo-territorial interaction, not centralized as is the EU wrongly attempting.
But France should also become part of that MNU as the socio-economic fabric is the same
Sadly for Greece, having joined the euro, there is now no painless solution to their problem; a problem in the case of economic downtturn that the euro's critics predicted right from the start, incidentally.
Short term there will be chaos, and that is the price the political class must accept for a foolish decision to join the euro. But, on balance, restoring the drachma is the best option for the country's long-term future prosperity - for the Greek people's ability to control their own economy according to local needs, and for the rest of Europe who will not have to flush good 'bailout' money after bad.
The bigger question is, when the defaults start and debt-holders have to take write-downs, can the ECB remain solvent? Who will bail out the ECB?
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