Eurozone chief lashes out at Greek exit 'propaganda'

May 15, 2012 | 08:32
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Euro chief Jean-Claude Juncker hit out Monday at speculation over a Greek exit from the eurozone, saying currency partners unanimously affirmed their "unshakeable desire" to keep Athens in the club.

Luxembourg Prime Minister and President of the Eurogroup Jean-Claude Juncker (R) speaks with Italian Prime Minister Mario Monti (L) and European Central Bank (ECB) President Mario Draghi (C) before the start of a meeting of the Eurogroup of eurozone finance ministers at EU headquarters in Brussels.

The Luxembourg prime minister said feverish talk of 'Grexit', inflamed by comments from Austria's Maria Fekter who suggested Greece would not only have to leave the eurozone but the European Union itself, was pure "nonsense, propaganda."

As Greek politicians readied for another day of last-ditch efforts Tuesday to agree a stable administration following elections that returned a majority of anti-austerity MPs, Juncker insisted that the Eurogroup expressed an "unshakeable desire to keep Greece within the eurozone."

Stressing that partners "will do everything possible to achieve that," he insisted: "I don't envisage, not even for one second, Greece leaving the euro area."

Juncker's mandate at the head of the finance ministers' forum ends in July, and he told hardliners within the group that European partners must "respect" the processes of Greek democracy.

"I am against this constant provocation," he said.

"We have to hope a government will be formed in the coming days and weeks, then deal with that Greek government."

However, he added it was wrong to "lecture" the country, saying "those who are threatening Greece day after day... This is not the way to deal with partners, colleagues, friends and citizens in the EU."

Juncker maintained that the idea of "Greece outside the eurozone was not a subject of debate -- absolutely no-one argued in that direction" during four hours of talks at EU headquarters.

EU partners had already granted Greece 148 billion euros of loans, and Juncker stressed that "this is not the time to relax" on budgetary consolidation and reforms.

However, Juncker did not "preclude" the possibility that Greece could somehow be given breathing space once negotiations on the implementation of the 130-billion-euro bailout deal agreed in March can begin with the new administration in Athens.

That idea was already rejected by German Finance Minister Wolfgang Schaeuble, who said beforehand that "it's not about generosity towards Greece."

The alternative, increasingly forecast by analysts and now being broached even among EU political partners, that Greece abandons the euro was on the minds of all attending the talks.

Spanish Foreign Minister Jose Manuel Garcia-Margallo, at separate talks of chief diplomats in Brussels, had stressed that membership of the eurozone depended firmly on "complying with the rules of the game."

Darkening prospects saw European shares sink and the euro tumble to its lowest point since January as markets increasingly speculated about the knock-on effects on the eurozone banking system in Spain and elsewhere of an exit.

EU economy commissioner Olli Rehn said party leaders in Athens face a grave responsibility at "this very critical juncture," stressing that "the future welfare of Greece and its citizens lies more than ever on the shoulders of the Greek politicians to keep their part of the solidarity pact."

Fekter reminded everyone beforehand that the EU rulebook remains unclear.

"You cannot leave the eurozone," she said. "You can leave the European Union and then you can leave the eurozone.

"Greece would have to strive towards accession again," she said.

Markets though remain unconvinced, ETX Capital trader Markus Huber saying that "a Greek exit might actually be a good thing for the eurozone in the long run," allowing EU partners to focus all their energies on how to support Spain and Italy.

While events in Athens in the short-term remain outside the immediate control of eurozone partners, the finance ministers also told Spain to "speed up" its work on repairing Spain's banking sector.

Juncker urged the Spanish authorities "to speed up their external assessment of the situation in the banking sector and to take the necessary measures to put in place credible backstops... Speed is of the essence," he said.

Public financial forecasts suggest Spain -- mired in recession with one-in-four unemployed -- has little chance of meeting even revised government deficit targets.

Drastic Spanish government reforms announced on Sunday already force banks to set up a new 30-billion-euro financial cushion and remove risky property assets from their accounts.


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