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Could Greece leave the Euro – could it be better for the country and the Eurozone?

Monday, 14 May 2012
If Greece does not respect the rules for the euro area, it is perhaps better that the country leaves the euro. This applies to all clubs and all organizations – this what is being openly said about Greece at the moment as the country struggles both internally and externally to stand.

The European Commission President, Jose Manuel Barroso in an interview with Italian TV, has come out to be one of those who have open voiced concern about Greece as confirmed by the Commission spokeswoman Pia Ahrenkilde-Hansen at a press briefing on Monday.

"It is a general observation. If a member of a club do not want to respect the rules, it is perhaps better that they leave the club. That applies to every organization or project, "she said.
She reiterated that the Commission still sees Greece's future in the EMU and believe it is best for both Greece and Europe.

Pia Ahrenkilde-Hansen admitted that there are no rules specified in the EU Treaty, how a country can make a withdrawal and how such process should be done.
"Most of the answers now rests on Greece, "said the spokeswoman, and repeated the hope that the political parties in Greece could form a coalition government and to proceed on the agreed second adjustment program with attached emergency loans from euro area countries and the IMF.

"We hope and expect that Greece respects the commitments it has undertaken, "said Pia Ahrenkilde-Hansen.

Spokeswoman did not want to divulge any information about any contingency plans for how a Greek withdrawal would be handled in practice.

Greece's radical left-wing party Syriza recently rejected an invitation from President Karolos Papoulias to meet for negotiations on the formation of a coalition. Papoulias attempted to organise talks with the country's three-largest parties, New Democracy, Syriza and Pasok, along with the smaller Democratic Left that had been involved in attempts to come to an agreement. If an agreement cannot be reached, the Greeks will return to the polls for new elections.

This difficulty of Greece to form a government has allowed the spokespersons for European central banks to now openly talk more about the possibility of the country leaving the euro.

According to reports some European officials there is increased speculation about a Greek exit, with the Financial Times earlier quoting central bank governors from Belgium and Ireland. "I guess an amicable divorce – if that was ever needed – would be possible, but I would still regret it," Belgium's Luc Coene. Ireland's Patrick Honohan said: "Technically, it [a Greek exit] can be managed. … It is not necessarily fatal, but it is not attractive."

Meanwhile, the President of the Bundesbank, Jens Weidmann, said at the weekend that if the country were to leave the exit the single currency, "the consequences for Greece would be more serious than for the rest of the Eurozone."

"For now, the absence of a formal government means that Greece will find it very tough to make any progress on the reforms it is required to deliver under its Troika assistance programme. Greece is likely to find itself with a pretty poor school report when its next review comes up, throwing into question the release of future aid tranches and Greece's ability to fund itself to keep even its own lights on," said analysts at brokerage Investec.
By with in put from ADVFN, the Daily world financial news provider.

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