The idea was totally taboo until now and, while exit from the EU became possible for the first time under the Lisbon treaty, there was no provision made for leaving the euro.
This was made clear by the ECB president, Mario Draghi, following his first board meeting when he responded to a question on Greece exiting the currency — “It’s not in the treaty”, he said.
Earlier, a European Commission spokesperson made a similar point, but said that the only way out of the currency was to leave the EU.
With the ongoing run on Greek banks gaining force, civil disobedience threatening to make achieving austerity measures very difficult, if not impossible, and contagion spreading to larger economies including Italy, an exit could not be ruled out.
Banks were reported to be getting rid of government bonds they hold from eurozone countries yesterday and Mr Draghi warned of a “mild recession” as growth slows, putting the euro under increasing pressure.
German Chancellor Angela Merkel, French President Nicolas Sarkozy and head of the eurozone finance ministers Jean-Claude Juncker appeared to ignore what was or was not possible according to the treaties when they warned Greece they risked being thrown out.
If the government manages to avoid calling an election today — which would take about 25 days to organise — it should be able to draw down the €8bn latest tranche of its first bailout loan in the next few weeks to pay for salaries and pensions mainly, and averting the first possible danger of default.
The fact that the Greek government must repay €3.6bn of bonds in mid-November and another €4bn before Christmas means they will need to comply with the terms of their loan to draw down the next tranche.
Greek premier George Papandreou made some reference in parliament yesterday to the opposition renegotiating the terms of the latest €130bn loan agreed on October 26. This would continue to cause market volatility and be dangerous for the rest of the eurozone.
Should the opposition demand a larger haircut on Greek debt than the 50% now being finalised with the banking institutions, the outcome could be a disorderly default and, according to an analysis by Bank of America, Merrill Lynch, Greece begins negotiations to reinstate the drachma.
However, the reaction of Chancellor Merkel and President Sarkozy to the risks posed to Greece’s future in the eurozone by a referendum suggest they do not want Athens to leave the currency, according to EU and Greek specialist Janis Emmanouilidis.
“They held a press conference before they spoke to Papendreou to put pressure on the Greeks and they were also saying ‘we want to continue to support Greece on the basis of what we decided at last week’s summit’.
“They know the potential costs of Greece exiting is so big and dangerous, they want to prevent it happening,” he added.
The G20 Cannes summit has already been hijacked by the Greek debacle and the drama will continue to be centred around Athens for the next days at least.