Greece, New Talks

The Sunday Telegraph reports

How some Tories see it

George Osborne

Update

Keep Talking Greece

New York Times

Charlemagne (The Economist)

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09.05.2011

THE CONSEQUENCES OF A NOT SO SECRET MEETING

It was always our contention that crisis resolution would consist of permanent rollover. When faced with the question of whether to allow Greece to default, or agree yet another (unrealistic) programme, European finance ministers accepted the latter.

At a secret meeting in Luxembourg, the finance ministers of a subset of eurozone countries met to discuss the future of Greece, and, according to the FT,  reached a consensus that they want to seek a whole new package, as the current Greek programme, which foresees a return to the markets in 2012, is not realistic.

Greece needs to raise €25bn-€30bn next year. The FT reports that the EFSF might buy up Greek debt in primary markets, complemented by a voluntary restructuring to roll over debt that falls due in 2012. Officials seem to have firmly ruled out any involuntary debt restructuring, which would create more problems than it would solve. The Greek finance minister was invited to the meeting so that officials could impress on him the importance of more austerity, and privatisation.

On Friday night, Der Spiegel reported that Greece had considered an exit from the eurozone, and revealed that such a meeting would take place, with Wolfgang Schäuble having a study in his briefcase on why a Greek exit would come at a prohibitive cost – for Greece, but also the eurozone itself. The story gave rise to frenzied denials by EU officials, and caused a further rout of the euro, which decline from a peak of $1.49 to $1.43 in two days. EU officials first tried to deny that such a meeting was taking place at all, but when that became impossible to uphold, they merely denied that the ministers discussed a restructuring of debt, let alone an exit.

Wolfgang Münchau writes in his FT column that the failure to be able to organise a secret meeting is symbolic of the difficulty in running a monetary union (and especially a debt rollover programme) with such a diverse group of executive decision makers. He said he no longer believes in any official pronouncements from any EU official. He said the absurd comments by Jose Socrates that he got a better deal than the Greeks and the Irish are also very typical for the eurozone’s collective action programme. He sees there more and more evidence for a bifurcation – a situation a few years down the road where eurozone member states will have to decide whether to jump into a political union, or to jump out of a monetary union.  

Juan Ignacio Crespo writes in El Pais that an exit from the eurozone would be tantamount to another global financial crisis. If Greece were to quit, the country’s banking system would collapse, and the country would face an economic and social implosion. And the crisis would immediately spread to the next eurozone country. Europe would at this point suspend both the internal market and the Schengen agreement.

The major German newspapers are divided on the merits of a second rescue package for Greece. While the economic dailies Financial Times Deutschland and Handelsblatt grudgingly endorse the idea Frankfurter Allgemeine Zeitung and Bild are in open revolt. FAZ’sHolger Steltzner points out that the EU and the IMF don’t have any means to put pressure on Greece as long as they exclude restructuring the Greek debt and Greece’s exit from the eurozone. Bild columnist Hugo Müller-Vogg argues that while the euro is indispensable for Europe, Greece is not. Should Greece wish to leave the currency zone nobody should stop it. “That would be expensive for the European taxpayer”, he argues. “But an expensive end is better than expensive rescue packages without end.”