Tags: Greece Denies It May Quit Euro | European Ministers Meet

Greece Denies It May Quit Euro, European Ministers Meet

Friday, 06 May 2011 03:07 PM

A small group of European finance ministers was meeting on Friday to discuss the euro zone debt crisis, official sources told Reuters, as Greece denied a media report that it was considering whether to leave the bloc.

European official sources told Reuters that finance ministers from a handful of the largest euro zone countries were meeting privately in Luxembourg to talk about issues including the severe sovereign debt problems of Greece and Portugal.

German Finance Minister Wolfgang Schaeuble and his deputy Joerg Asmussen were at the meeting, a source in Germany's ruling coalition said. The meeting was not publicly revealed in advance, and the identities of the other officials attending were not known.

Germany's Spiegel Online reported the ministers would discuss the possibility of Greece withdrawing from the 17-member euro zone, as well as the idea of Athens restructuring its 327 billion euro ($470 billion) sovereign debt.

"The government has raised the possibility of leaving the euro zone and reintroducing its own currency," Spiegel said, without citing its sources.

Greece's Deputy Finance Minister Filippos Sachinidis denied the report, suggesting it played into the hands of currency traders. The euro fell nearly 1 percent against the dollar in response to the report, while the cost of insuring Greek debt against default was quoted at a record high.

"The report about Greece leaving the euro zone is untrue," Sachinidis told Reuters. "Such reports undermine Greece and the euro and serve market speculation games."

Jean-Claude Juncker, head of the group of euro zone finance ministers, also said the report was wrong. "I totally deny that there is a meeting, these reports are totally wrong," Juncker's spokesman, Guy Schuller, told Reuters by telephone.

A European official source told Reuters that the Luxembourg meeting was reviewing a range of issues such as the economic situations of Portugal and Greece as well as the future leadership of the European Central Bank.

He said there were no plans for a restructuring of Greece's debt. Last May, the country obtained a 110 billion euro bailout from the European Union and the International Monetary Fund, but it has been struggling to cut its budget deficit as fast as planned amid a deep recession.

 

EXIT COSTS

Greece, which joined the euro zone in 2001, has been introducing tax rises and spending cuts for a year but it is still plagued by tax evasion, corruption and the economy's lack of competitiveness.

Financial markets have been speculating for months that Athens will eventually have to restructure its debt and with the political will for more austerity starting to flag, some Greek politicians have been suggesting a "soft" restructuring which might involve lengthening maturities on the country's bonds.

An exit from the euro zone could help the economy in the long term; Greece would be able to cut interest rates and having its own, weak currency would boost exports and tourism.

But there is no legal procedure for leaving the zone, and the risks and immediate costs of the process -- Greece could face bank runs, and banks around the region could be damaged -- mean the government is likely to fight hard to avoid that option.

Although taxpayers in rich euro zone states such as Germany are becoming increasingly reluctant to fund weak euro zone states, their governments prize the currency union as one of Europe's great political achievements. The EU is currently negotiating a bailout with Portugal, the third state it is rescuing after Greece and Ireland.

A German government official told Reuters that a Greek exit from the euro zone "is not planned and was not planned", while a spokesman for the Austrian finance ministry said a breakup of the bloc would be "absolutely unthinkable".

Spiegel quoted from what it said was an internal German finance ministry paper that Schaeuble was taking with him to Luxembourg, which warned that a Greek exit "would lead to a significant depreciation of the domestic currency versus the euro" and increase Greece's debt levels to 200 percent of gross domestic product. Its debt is officially projected to climb to 153 percent of GDP this year.

© 2017 Thomson/Reuters. All rights reserved.

 
1Like our page
2Share
FinanceNews
A small group of European finance ministers was meeting on Friday to discuss the euro zone debt crisis, official sources told Reuters, as Greece denied a media report that it was considering whether to leave the bloc. European official sources told Reuters that finance...
Greece Denies It May Quit Euro,European Ministers Meet
681
2011-07-06
Friday, 06 May 2011 03:07 PM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved