13 May 2012

FT: Fear grows of Greece leaving euro

Eurozone central bankers have talked publicly for the first time of managing a possible Greek exit from Europe's monetary union, as the stalemate in Athens' talks on a coalition government raises the prospect that Greece will renege on the terms of its international bailout.

The comments by members of the European Central Bank’s governing council indicate that the risk of eurozone fragmentation is being taken increasingly seriously by the region’s policymakers. They mark a significant shift at the ECB, which has previously argued that European treaties do not allow for an exit and that a break-up would cause incalculable economic damage.

Along with policymakers across the eurozone, the ECB has stepped up the pressure on Greece to stick to its internationally agreed bailout programme – and warned that reneging would lead to outside financial support being cut off.

In contrast to this weekend’s comments, last December Mario Draghi, ECB president, told the FT that a eurozone exit would result in a substantial breach with the existing treaty with incalculable consequences for the bloc.

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