Default will spell ‘euro’s demise’

A DISORDERLY Greek default could result in the demise of the euro, according to the non-executive chairman of Goldman Sachs International, Peter Sutherland.

The former EU commissioner and Irish attorney general, told the Institute of International & European Affairs the next few weeks will be of great importance and potentially dangerous, not least because many countries, including Germany, still have to adopt the legislation necessary to give effect to the agreement of July 21 increasing the funds of the EFSF to €440 billion.

Greece is another reason for concern.

“If Greece were to default on its obligations, other than through an agreed restructuring programme, the likely effect, in my opinion, will be contagion, not merely to the other ‘programme’ such as Ireland, but possibly even to Spain and Italy as well. This would threaten the whole edifice,” he said.

Mr Sutherland said Ireland has a brief opportunity to put clear blue water between ourselves and others and perhaps to surprise the markets with the demonstration of our resolve.

“In fact I agree with Jurgen Starks’ conclusion that the Government should capitalise on improving market sentiment towards Ireland by front-loading cuts outlined in the bailout plan, although I recognise how politically difficult this would be.

“But the prize would be great indeed if we did so because it would indirectly help to open up credit again in the economy through the funding opportunities that would result,” he added.

Mr Sutherland noted that the euro is in many respects a great success and has, even in recent times, increased in value against the dollar.

“It has helped to deliver growth in the euro area in its first decade at a rate per person that is more or less equal to that of the US,” he said.