Thursday

20th Feb 2020

Eurozone in 'very political' meeting on Greece and Spain

  • Council room: Meetings of eurozone finance ministers have a reputation for lasting long (Photo: Valentina Pop)

Eurozone finance ministers are to hold a "very political" meeting on Monday (14 May) amid intensified speculation of a Greek exit from the single currency and worries over the deficit implications of the Spanish bank rescue.

While no decisions are expected from the meeting, which starts at 3pm Brussels time, ministers are likely to make statements on the necessity for Greece to form a government. "It will be a very political meeting," one eurozone official told journalists in Brussels ahead of the event.

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A last-ditch attempt by former finance minister Evangelos Venizelos failed over the weekend, with the country's president set to try on Monday afternoon to reconcile anti-bail-out parties with the outgoing coalition.

Alexis Tsipras, the leader of the radical left Syriza party which came in second in the 6 May elections, has already declined to show up to the talks. Failure to form a government would lead to early elections in June. Opinion polls put Syriza in the lead, which would give it even an stronger mandate against the austerity measures attached to the €130 billion international bail-out agreed in March.

Tsipras says he wants to keep Greece in the euro but the "barbaric" and German-inspired bail-out is no longer valid because Greek voters have rejected it.

EU officials and finance ministers from donor countries say that a deal is a deal and nobody can keep Greece inside the euro against its will.

"We cannot force a country to stay in the euro. Of course we don't want that Greece leaves, that's crystal clear. But we would be quite a funny government if we did not prepare for all thinkable case scenarios," German finance minister Wolfgang Schauble told Welt am Sonntag newspaper in an interview.

On Monday, the front page of Germany's influential Der Spiegel magazine said: "Acropolis, Adieu! Why Greece must leave the euro." Meanwhile, WirtschaftsWoche, an economics magazine, put the "Grexit" costs for Germany at €77 billion, assuming that the country would not pay back its debt.

Other eurozone officials over the weekend also openly talked about the Greek exit scenario.

"Divorce is never smooth ... I guess an amicable divorce - if that was ever needed - would be possible, but I would still regret it," Belgium's European Cental Bank member Luc Coene told the Financial Times.

Spain

Spain's troubles - which currently revolve around cash-strapped banks which need public money - are also likely to feature on the eurogroup agenda. Economic forecasts published on Friday suggest the country - mired by recession and high unemployment - will miss its deficit target by over one percent this year.

The EU commission on Sunday welcomed the banking reforms recently unveiled by the government - a hint that it may not recommend sanctions at the end of the month when it is supposed to assess how countries are dealing with their deficits.

"By deciding on these important measures for the banks, on top of those already announced in February, Spain is taking decisive action in addressing remaining vulnerabilities within the sector," economics commissioner Olli Rehn said in a statement.

State aid to the banks will have to be "analysed and approved by the commission," he added, in reference to a recent take-over by the Spanish government of Bankia, a troubled lender.

"These actions should dispel the lingering doubts about the stability of the Spanish banking sector," Rehn noted.

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Eurogroup chief Jean-Claude Juncker on Monday lashed out at EU politicians talking "nonsense" about a Greek euro exit, and hinted at possible adjustments in the austerity programme if Greece forms a government.

Spain hit by downgrades amid Greek contagion fears

Spain's economic woes deepened on Thursday as 16 of its banks and four regions were downgraded by Moody's, while statistics confirmed the country is still in recession, just as fears about a Greek euro-exit are running high.

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