Growing calls for Greece to leave the euro amid bailout concerns

German Finance Minister Wolfgang Schäuble (Wikipedia)

EU working on second Greek bail-out in order to get the first one back on track;
Irish Cabinet Minister: Ireland may also need another bail-out
Reuters reports that the EU is drafting a proposal for a second EU/IMF bail-out for Greece to ensure the country receives the next tranche of funding from the original bail-out, after the IMF confirmed it would only release more funds if it received guarantees that Greece would be able to fund itself over the next 12 months. Fitch has said that Greece will need another €90-100bn to meet its funding needs until the end of 2014. This would avoid the country from defaulting and “potentially buying it sufficient time to put necessary reforms in place to enhance public debt sustainability,” Fitch said.

The latest progress report on the state of the Greek crisis, compiled by the EU/IMF/ECB, is expected this or early next week and should highlight how large a funding gap Greece will have over the next year. However, the FT reported yesterday that the EU/IMF may only provide half of the required amount with the rest being made up by the sale of Greek public assets. Any second bail-out is likely to include even stricter conditions than the first and may even include giving the EU/IMF a strong say over privatisation and tax collection, according to the FT.

Kathimerini reports that Greek opposition leader Antonis Samaras continues to insist on tax cuts in return for support for a new austerity package. Protests in Greece against austerity have continued into their sixth day but remain peaceful.

FT Deutschland reports that German Finance Minister Wolfgang Schäuble said yesterday that a second Greek bail-out would only be possible if conditions for the first bail-out are fulfilled, saying: “Only when the conditions [of the EU/IMF/ECB progress report] are fulfilled, can we broaden the program…If not, than we will experience what will happen with a currency union if it is no longer capable to solve its problems.”

Reuters reports that Ireland may also have to ask for a second bail-out, following comments by Irish Transport Minister Leo Varadkar over the weekend. Varadkar told the Sunday Times that Ireland may not be able to return to the markets as soon as is expected under the current bail-out conditions, saying: “I think it’s very unlikely we’ll be able to go back next year. I think it might take a bit longer … 2013 might be possible but who knows?” Prime Minister Enda Kenny moved quickly to dispel the rumours, saying: “There will be no need for a second bail-out for Ireland in 2012.”

Spanish daily ABC cites Open Europe research warning of a “perfect storm scenario” in Spain, which would see a worsening of the crisis in countries such as Greece and Portugal coincide with domestic factors such as a large drop in real estate prices and an increase in the number of bad loans in Spanish banks.
Reuters FT Independent Irish Independent IHT CityAM WSJ WSJ 2 Express Guardian Monday’s FT Monday’s FT 2 Irish Times Monday’s FT 3 EUobserver Reuters 2 Kathimerini Naftemporiki Kathimerini Coulisses de Bruxelles ABC FTD FD FT Weekend Reuters 3 Irish Independent 2 Irish Times 2 Welt El País: Carstens Reuters

Eurozone comment round-up: Growing calls for Greece to leave the euro
In the WSJ, Josef Joffe, Editor of German daily Die Welt, argues that, “Greece faces default no matter what it does, but only abandoning the euro would give it a chance at growth.” In Dutch daily De Telegraaf, former Dutch Social Democrat Finance Minister Willem Vermeend argues that, “Greece should leave the euro”. Harvard Economics Professor Martin Feldstein argues, “A temporary leave of absence from the eurozone would allow Greece to achieve a price-level decline relative to other eurozone countries, and would make it easier to adjust the relative price level if Greek wages cannot be limited.”

Writing in the FT, Wolfgang Münchau states that Greece and possibly other countries of the eurozone’s periphery are likely to default sometime between 2013 and 2016 but “the main creditors left by then will be EU governments and the IMF”. He asks will EU leaders “forgive Greek debt, which would be a massive fiscal transfer? Or will they allow the eurozone to crack up, which would also be a fiscal transfer?”

The FT’s Brussels bureau chief Peter Spiegel argues that, following the eurozone crisis and the row over the border-free Schengen zone, “European integration is unravelling” and “we may be witnessing a generational change in European political dynamics.”
FT: Spiegel Monday’s Independent: King Monday’s FT: Munchau Monday’s Telegraph: Bootle Irish Times: Beesley Spectator: Coffee House blog Sunday Times: Stelzer WSJ: Stelzer IHT WSJ: Hannon WSJ: Joffe Le Figaro: de Kerdrel Telegraaf Project-syndicate: Feldstein Telegraaf: Vermeend

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