Greek Euro Exit “Almost Inevitable” If Left Wins Election

Germany believes a Greek withdrawal from the European currency union could be managed.

German chancellor Angela Merkel speaks with Greek prime minister Antonis Samaras in Berlin, September 26, 2014
German chancellor Angela Merkel speaks with Greek prime minister Antonis Samaras in Berlin, September 26, 2014 (Bundesregierung)

The German government believes a Greek withdrawal from the eurozone would now be manageable, the country’s leading weekly, Der Spiegel, reported on Saturday.

German chancellor Angela Merkel, who leads Europe’s strongest economy and largest creditor nation, previously insisted there was no alternative to bailing out Greece. Sovereign default in the Balkan country could have triggered the collapse of the single currency altogether, she warned.

That is no longer the case.

German officials believe sufficient progress has been made since the height of the European debt crisis in 2012 to allow a country to exit the currency union.

The risk of contagion to other countries has been limited because Portugal and Ireland are seen as rehabilitated. With the ESM, there is also a powerful rescue mechanism available.

European leaders established the European Stability Mechanism (ESM) in 2012 as a permanent bailout fund.

Greece alone has received €240 billion in bailouts from other European Union countries and the International Monetary Fund. It wants to switch back to market financing this year.

The aid was conditioned on budget consolidation and liberal economic reforms which have proven unpopular. Many Greek voters resisted austerity and attribute the country’s high unemployment to the reforms successive centrist governments — that depended on other European countries for support — enacted.

Although the jobless rate has been falling, a quarter of Greeks is still out of work.

Polls predict the far-left Syriza party could defeat the ruling conservative New Democracy party in elections later this month. It wants to tear up Greece’s bailout agreements, stop budget consolidation and write off part of the country’s debt, proposals that put it on a collision course with Germany.

Greece previously restructured its privately-held debt in 2012. 90 percent of its debt is now owed to official creditors, mainly other eurozone governments.

According to Der Spiegel, the Germans think a Greek exit from the euro “almost inevitable” if Syriza wins the election.

A government spokesman refused to comment on the story on Sunday but said Germany expected Greece to “continue to comply with its obligations” whatever party was in power.

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