Greece will not leave the euro zone unless the country "totally refuses" to fulfil any of its reform targets, the head of the Eurogroup said today, as Germany insisted the crisis-stricken country must stick to the agreed reforms.
"It will not happen, unless Greece were to violate all requirements and not to stick to any agreement," Eurogroup president Jean-Claude Juncker was quoted as saying in Austria's Tiroler Tageszeitung newspaper, days before meeting Greece's prime minister. "In case of such total refusal by Greece with regards to budget consolidation and structural reform, one would have to look into the question."
Mr Juncker said he expected Greece to double its efforts to fulfil its reform targets, making this scenario irrelevant.
German finance minister Wolfgang Schäuble has said there are limits to the aid that could be granted to Greece and said the crisis-stricken country should not expect to be granted another programme.
"It is not responsible to throw money into a bottomless pit," Mr Schäuble said at a government open day in Berlin. "We cannot create yet another new programme."
According to a Greek newspaper report, finance ministry officials in Greece have calculated that the debt-stricken country's economy will recover faster and its debt be more sustainable if it is given two more years to reduce its budget deficit.
The estimate chimes with the view of Greek prime minister Antonis Samaras who has tried, unsuccessfully, to win such an extension in the past and is expected to refloat the proposal next week with the leaders of France and Germany as well as with Jean-Claude Juncker, the Eurogroup chief.
Under the terms of its European Union/International Monetary Fund bailout, Greece is bound to implement painful austerity measures to bring its budget deficit below 3 per cent of GDP by the end of 2014, from an expected 9.3 per cent of GDP this year.
But with the country in its fifth consecutive year of recession and social and political discontent rising, Mr Samaras is keen to soften the impact of budget cuts on society by extending the deadline international lenders set it.
The latest estimate, reported by the Imerisia newspaper, cited calculations by finance ministry officials it did not name, saying they had worked out that a two-year extension would help the economy shrink at a slower pace in 2013 and rebound quicker from 2014.
Under such a scenario, the economy would shrink by 1.5 per cent in 2013 and grow by 2 per cent in 2014, the newspaper said. If no extension was granted, the economy would contract by up to 4.5 per cent next year and not recover before 2015, it said.
Mr Schäuble also stressed that the euro was a stable currency and said there were no signs of inflation.and also rebuffed demands to finance state debt via the European Central Bank (ECB).
"If we start doing that, we won't stop. It's like when you start trying to solve your problems with drugs," he said.
Reuters
