Commission: Catastrophe if Greece quits euro

The European Commission warned of “catastrophe” if Greece has to abandon the euro and its chief executive, Jean-Claude Juncker, urged EU governments to show solidarity as Athens struggles to secure more credit.

A day after German finance minister Wolfgang Schaeuble said Greece might stumble out of the eurozone because new, left-wing leaders failed to negotiate new borrowings, Juncker’s economics commissioner said EU hardliners underestimated the risk that this would start a fatal domino collapse of the common currency.

“All of us in Europe probably agree that a Greek exit would be a catastrophe — for the Greek economy, but also for the euro zone as a whole,” Pierre Moscovici told Der Spiegel — a view not in fact shared by some conservative allies of Chancellor Angela Merkel who favour amputating the bloc’s troubled Greek limb.

Moscovici, a French Socialist, countered the argument that protective mechanisms put in place in the three years since the last major debt crisis meant the Greek exit could be contained, or even strengthen the euro.

“If one country leaves this union, the markets will immediately ask which country is next,” Moscovici told the German magazine. “And that could be the beginning of the end,” he said.

Moscovici’s comments reflect alarm in the new Commission formed under Juncker in November that brinkmanship by leaders on both sides of the dispute in the eurozone risks getting out of hand, and a fear governments underestimate the potential damage.

Pledging to help find a compromise, Juncker spent 90 minutes hosting Greek Prime Minister Alexis Tsipras, reinforcing a relationship that has irked some in Berlin who fear the EU executive, which is not itself a lender to Greece, may muddy the debt negotiations and try to water down the lenders’ terms.

An EU official told Reuters that Juncker urged Tsipras, 20 years his junior, to do much more to show creditors he was meeting their demands for savings and free market reforms. If he did not, he told Tsipras, there was “a distinct danger” Greece could find itself shut out of the euro monetary system.

In public, Juncker sounded a note of urgency to other EU governments: “This is not a time for division. This is the time for coming together,” he said.

Tsipras is trying to satisfy conditions from lenders who last month extended until June a €240bn bailout deal while also retaining the support of voters who elected him to end years of austerity.

Commission officials say Juncker, a long-time premier of Luxembourg and former chair of the Eurogroup of eurozone finance ministers, is alarmed by talk of letting Greece go if Athens fails to make savings and the free market reforms demanded. Schaeuble said on Thursday there was a risk of that happening if negotiations failed.

“As the responsibility, the possibility to decide what happens lies only with Greece and because we don’t exactly know what those in charge in Greece are doing, we can’t rule it out,” he told an Austrian broadcaster.

Merkel’s spokesman played down talk of a “private feud” with Athens, where officials have raised complaints about the Nazi occupation and World War Two reparations.