THE PROSPECT of a Greek exit from the euro moved from the realm of theory into practice yesterday as G20 leaders began to examine how it could be achieved if Athens refuses to implement its austerity package.
The shift follows a change in rhetoric from German Chancellor Angela Merkel and French President Nicolas Sarkozy on Wednesday night, with both saying that the single currency must continue “with or without Greece”.
UK Treasury secretary Mark Hoban admitted that Britain has begun contingency planning for euro exit, saying the currency “is breaking up”.
And analysts circulated a 2009 ECB paper that examined “withdrawal and expulsion from the EU and EMU (monetary union)”.
In a conclusion that will inspire little confidence, the paper says: “A member state’s exit from [euro], without a parallel withdrawal from the EU, would be legally inconceivable; and that, while perhaps feasible through indirect means, a Member State’s expulsion from the EU or [euro], would be legally next to impossible.”
The G20 talks were also mired in chaos over events in Greece. EU president Herman van Rompuy gave a statement in the evening in which he appeared unsure of events.
“The case of the Greek referendum created a lot of confusion so I hope this is off the table so we can work on constructive solutions. Apparently the idea of a referendum is not any more actual. Let’s hope it is the case,” he said.
Analysts are divided over whether Greece’s departure from the Eurozone would be manageable or would be “Eurogeddon”, as the Economist Intelligence Unit termed it.
Capital Economics’ Jonathan Loynes said: “The fact that a Greek exit has been so openly discussed amongst the Eurozone’s elite is still a seismic shift from the previous position. The cat, it would seem, is well and truly out of the bag.”