Germany hints at Greek eurozone exit
Growing fears of a Greek default sent a hurricane through heavily exposed French banks yesterday and hit the euro as investor confidence in the European currency area’s ability to surmount a sovereign debt crisis ebbed. Shares in Societe Generale, BNP Paribas and Credit Agricole slumped by more than 10% amid expectations of an imminent downgrade by credit ratings agency Moody’s, due largely to their exposure to Greek bonds.
The shock resignation of European Central Bank chief economist Juergen Stark last Friday, and weekend comments by German politicians suggesting Athens may have to default and be “suspended” from the eurozone, drove the euro to a 10-year low against the yen and a seven-month low against the dollar, although it later recovered some ground.
Meanwhile, a top Merkel aide signalled the German chancellor’s support for the leaders of her two centre-right coalition partners, after they spoke publicly on the option of Greece departing from the currency bloc or carrying out an orderly bankruptcy.
Economy Minister Philipp Roesler, who leads junior coalition party the Free Democrats said in an article for daily Die Welt that to stabilise the euro there could “no longer be any taboos”.
“That includes, if necessary, an orderly bankruptcy of Greece, if the necessary instruments are available,” Roesler, who is also deputy chancellor, added.
Merkel spokesman Steffen Seibert said this was also the government’s view.
Horst Seehofer, head of the third party in her coalition, the Christian Social Union, last week was the first top German politician to suggest publicly Greece may leave the euro.
“The good relationship between the chancellor and the president of the CSU is reflected in many, many conversations and this will of course be a subject when they next talk,” Seibert said.
Seehofer, who was meeting his Bavarian party’s leadership yesterday to approve a new policy paper threatening to eject over-indebted states from the eurozone, said he liked the direction of the debate.
“I am pleased people have been speaking out on these issues,” he said in Munich.
While many analysts have long said that Greece would eventually have to default, signs that German leaders could allow this to happen earlier than previously thought have prompted selling of European banking shares and the euro.
The FDP and CSU have taken a tougher line on eurozone bailouts than many inside Merkel’s own conservative Christian Democratic Union (CDU), but a senior member of her party said he agreed that Greece might have to think the unthinkable.
“The situation is very serious, more than some had thought,” said conservative parliamentary floor leader Peter Altmaier who is from of the CDU.
Greece would only receive the next tranche of aid if it convinces the “troika” inspectors from the European Commission, European Central Bank and International Monetary Fund that it is tackling its debt, Altmaier said.
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