Tags: Eldon | Griffiths | Eurozone | germany

Sir Eldon Griffiths: Euro May Survive but Maybe Without Greece

By    |   Wednesday, 18 Apr 2012 01:07 PM

The eurozone's future remains in doubt but if it does survive, Germany will likely step up and assume more leadership over its neighbors and Greece may drop out, says Sir Eldon Griffiths, a former member of British Parliament and former editor of Time, Life and Newsweek Magazines.

Lingering for more than two years, the European debt crisis appears to be rekindling after a bailout package arranged for Greece calmed markets for a while.

More recently, yields have been rising in Spanish government bond auctions, as investors demand more in return for investing in the country on fears that Spain poses greater risk.

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"I think it's by no means certain that all of the present members of the euro will be able to stay within it. Greece has come very close to default on a number of occasions, and the political and economic changes that they have to make in order to stay there are very, very harsh," Griffiths told Moneynews.TV in an exclusive interview.

"The euro area more or less will stay together, there will be more power at the center, but I would not exclude Greece being unable to stay in."

In exchange for rescue funding, Greece has agreed to harsh austerity measures such as public-sector layoffs, tax hikes and pension reforms needed to streamline the country and chip away at debt burdens.

Critics say austerity won't get the country's economy flourishing again, claiming growth is what's really needed for more lasting recovery.

Strikes and protests have erupted in the streets of Athens, and many are worried if the larger Spanish and Italian economies will come under pressure as well.

"My guess is that the euro will have to change the management in the system and there is the big political issue. In order to manage the euro, you'd have to have more power at the center. In other words, more power in Brussels," Griffiths says, referring to the Belgian capital where the European Union is based.

"That is an abdication of the power of the local governments of Greece, of Italy and so on. That may be financially necessary and certainly the Germans would be in favor of that, provided that they were the chief movers of the center."

The eurozone today is a common currency bloc, with member countries operating under one central bank.

Each country manages its own fiscal house, and although the bloc set policies limiting how much debts countries ran up, Greece, Italy and others continued to spend beyond their means.

More centralized fiscal management among member nations generally means having one country telling another how to run its finances.

That one country would likely be Germany — to an extent.

"I think that does have to change but the change in question has I think to be not totally controlled from Brussels. We're not ready for that. This isn't the early part of the American revolution when Washington had to take control, for example, of the currency," Griffiths says.

"One of the issues, of course, is whether it will be a German-led Europe, or whether it will be a Europeanized Germany. And our history of conflicts with the Germans over the last fifty to 100 years says to me that a Europeanized Germany, rather than a Germanized Europe, is what we should be shooting for."

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