Tuesday

17th Oct 2017

Euro-architect hints at Greek exit

Former European Central Bank (ECB) chief economist and German central banker Otmar Issing has warned that the eurozone may split up - another voice in the chorus talking about a Greek exit from the common currency.

"Everything speaks in favour of saving the euro area. How many countries will be able to be part of it in the long term remains to be seen," Issing wrote in his latest book, entitled: "How we save the euro and strengthen Europe."

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  • Talk about a Greek euro-exit has picked up again (Photo: Constantine Gerontis)

Seen as one of the founding fathers of the euro, as he was at the ECB when the euro was launched in 1999, Issing contradicted the current ECB chief who last week insisted that the euro was irreversible.

"We are still a long way off saying 'that's it, now we are sure to make progress'. Substantial reforms in almost all countries are still pending," he wrote.

The role of the ECB as a firefighter in the euro-crisis is also something Issing dismisses: "The less politicians address the root of the problems, the more they look with their expectations and demands to the ECB, which is not made for this. It is a central bank and not an institution to rescue governments threatened by bankruptcy."

Issing's book come just a few days after the head of the Eurogroup of finance ministers, Jean-Claude Juncker, said that the area would "manage" a Greek exit, even if it was not desirable.

German economy minister Philipp Roesler last month said the prospect of Greece leaving had "lost its terror," while regional politicians in Bavaria are demanding for the country to exit by the end of the year.

Meanwhile, Dow Jones newswire reported that the troika of international lenders is delaying its return to Athens to October, rather than September, amid continued struggles by the Greek government to seal a deal on €11.5 billion worth of spending cuts.

The cuts are needed for more money from the €130 billion bailout to flow to the troubled country, upon a troika report saying the Greeks are doing the right things.

In the meantime, the country is rapidly running out of cash. A €3.1 billion bond held mostly by the ECB matures on 20 August, posing an immediate liquidity risk to the twice-bailed-out nation.

Deputy finance minister Christos Staikouras told Skai tv that the spending cuts must be finalised by 14 September when eurozone finance ministers are meeting in Cyprus for an informal gathering.

The cuts were due to be sealed in June, but after two successive elections, Greece has missed all the deadlines for this year.

"We are looking everywhere," conservative Prime Minister Antonis Samaras told reporters in Athens.

The coalition talks are stalling because the two leftist parties in the government oppose any further cuts in public sector jobs.

Analysis

Juncker's euro-push could risk unity, warns eastern flank

The EU Commission chief hopes that as Emmanuel Macron pushes for euro area countries to integrate further creating a multi-speed Europe, central European members will be more inclined to join the single currency. Are they?

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