Eu commissioner warns of “endgame” in athens

Eu commissioner warns of 'endgame' in athens

For the first time, a member of the EU commission has publicly acknowledged that there are scenarios in the event of a greek exit from the euro. Due to the difficult formation of a government and the new elections in athens, there is currently intense speculation on the financial markets about the bankruptcy-threatened country leaving the common currency area. Leading rating agencies again punished greece and spain’s banks, the stock markets continued their upward and downward slide on friday.

De gucht warned in an interview with the belgian newspaper "de standaard" on friday: "the endgame has started, and i don’t know what the outcome will be."A spokesman for the EU commission promptly denied that any exit scenarios were being worked on.

De gucht assessed the risk of contagion for crisis-stricken euro countries such as spain and italy as manageable: "a year and a half ago, there may have been the danger of a domino effect.He added: "but now departments in the european central bank and the european commission are working on contingency scenarios in case greece does not make it"." He did not want to give details.

A spokesman for the EU commission rejected these statements in brussels: "the EU commission denies that it is working on an exit scenario for greece. EU commission wants greece to stay in euro area." Also EU commissioner for security olli rehn contradicted: "we are not working on the scenario of a greek exit."Work will continue on the basis of greece remaining in the euro zone. Rehn clearly put de gucht in his place: "karel de gucht is competent for trade. I am responsible for financial and economic affairs and relations with the ECB."

The president of the european central bank (ECB), mario draghi, had stressed only midweek that it was the ECB’s "strong preference" that greece remain a member of the eurozone. However, the decision on the future of greece in the euro zone will not be taken by the ECB.

In the interview, de gucht pointed out the consequences of a euro exit for the country: "in the event of such an exit, the chaos in greece would be enormous."The state will neither be able to pay civil servants nor to order pensions, and inflation will skyrocket. From athens, the bank employees’ association reported that operations were back to normal after the rush on greek banks at the beginning of the week.

German finance minister wolfgang schauble (CDU) told french radio station europe 1 on friday that greece must remain in the eurozone, but the country itself must also do its part to restore its economy to health. However, the behavior of the country’s political elite is causing him skepticism. It’s not about false promises now, but about explaining reality to an unsettled population.

On friday, investors reacted with uncertainty to the latest news. The dax fell by 0.60 percent to around 6271 points at the close of trading and fell to its lowest level since mid-january.

With a view to a possible exit of greece from the eurozone, the rating agency fitch had lowered the rating of greece’s creditworthiness again the previous evening. The rating agency downgraded the creditworthiness to the lowest level prior to default.

At the same time, after its roundabout attack on italian banks, competitor moody’s also lowered its credit rating for 16 spanish banks, including the major banks banco santander and BBVA, by one to three notches. The financial sector of the fourth-crumbling euro economy is suffering from the consequences of the burst real estate bubble with a large number of non-performing mortgage loans. The devaluations reflect the worsening conditions of the banks, but in some cases also the assessment of the spanish state’s ability to support the banks, it said. The euro fell at times on friday to 1.2642 U.S. Dollars, the lowest price since mid-january. Since the beginning of may alone, the community currency has lost six cents, or almost five percent, in value.

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