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08.02.2012 Business & Finance

'Greece Exit Would Not End Euro’

By Daily Guide
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Pressure is rising on Greece's national unity government to agree tough reforms demanded by the country's lenders.

The EU, IMF and European Central Bank have made further spending cuts, labour market reforms and bank rescues a condition of extending a new bailout.

European Commission Vice President Neelie Kroes told a Dutch newspaper that there would be “absolutely no man overboard” if Greece left the euro.

Greek party leaders meet on Tuesday afternoon amid a general strike.

A previous meeting on Sunday night proved inconclusive, leading to further last-minute talks between Prime Minister Lukas Papademos and the Troika of official lenders on Monday.

Meanwhile, public transport and the country's ports ground to a halt as two of the largest Greek public-sector unions began a strike on Tuesday in protest at continuing austerity.

Police had to use tear gas to prevent some protesters on Syntagma Square from breaking a cordon around the parliament building.

The Greek economy is expected to suffer a fifth consecutive year of recession this year, and has already shrunk 12% since 2008.

“What's a man overboard?” Mrs Kroes told the Dutch newspaper Volkskrant. “It's always said that if you let one country get out, or ask it to get out, then the whole structure collapses. But that's simply not true.

The Greeks have to realize that we Dutch and we Germans can only sell emergency Greek aid to our taxpayers if there's evidence of good will.”

A similar message was delivered with a more optimistic spin by Jean-Claude Juncker, chairman of the “eurogroup” of eurozone finance ministers, who said he had no doubt that Greece would remain within the eurozone, provided that it met its obligations to other members.

“The euro will outlive us all,” he said.
Mrs Kroes' boss, Commission President Jose-Manuel Barroso, also weighed in, insisting “we want Greece in the euro”.

There has been growing speculation that eurozone leaders are preparing the way for a Greek exit from the single currency.

“It would take a true optimist to expect the Greece's fiscal difficulties will start to improve once its second bailout is agreed,” said Dutch bank Rabobank in a research note on Tuesday.

“For [eurozone] politicians it is not necessary sympathy with Greece's position that is keeping Greece in [the euro], but rather the potential for the Greek crisis to deal the rest of [the eurozone] an enormous blow through contagion, that is underpinning support to maintain the status quo.”

There has been growing speculation that eurozone leaders are preparing the way for a Greek exit from the single currency.

“It would take a true optimist to expect the Greece's fiscal difficulties will start to improve once its second bailout is agreed,” said Dutch bank Rabobank in a research note on Tuesday.

Fears have most recently focused on Portugal, whose government is rumoured to be sounding out lenders about a restructuring of its own heavy debtload.

As part of Greece's new 130bn euro ($170bn; £110bn) bailout deal, private sector lenders have agreed to write off up to 70% of the value of the money that the Greek government currently owes them.

Eurogroup chairman Mr Juncker gave his backing to a German plan that a proportion of future bailout money should be paid into an escrow account that can only be used by the Greek government to repay its other, private-sector lenders.

On Monday, Greek Finance Minister Evangelos Venizelos said the negotiations in Athens – which went on until four in the morning – were “so tough that as soon as one chapter closes another opens”.

He was speaking after meetings with EU, International Monetary Fund and European Central Bank delegates.

Mr Venizelos went on to criticise the political parties for not reaching a deal with the nation's benefactors.

BBC
 

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