A GREEK exit from the euro zone would be manageable, European Central Bank policymaker Joerg Asmussen said yesterday, although he would prefer it if the crisis-stricken country remained within the single currency zone.
He also said that the Bundesbank, whose chief ECB president Mario Draghi had singled out earlier this month for expressing reservations over the bank’s new bond-buying plans, was not isolated in Europe.
The comments on Greece from the ECB executive board member, Germany’s deputy finance minister until he took the post at the end of last year, sum up a growing debate in Berlin on the possibility of cutting Greece free.
Most would prefer not to, but an increasing number of MPs and influential figures have come out of the woodwork saying the euro zone is strong enough to deal with the fallout.
“Firstly, my clear preference is that Greece should remain in the currency union,” Mr Asmussen said in an interview in Germany’s Frankfurter Rundschau on Monday. “Secondly, it is in Greece’s hands to ensure that. Thirdly, a Greek exit would be manageable.”
However Mr Asmussen also warned that a so-called Grexit would not be as orderly as some imagined. “It would be associated with a loss of growth and higher unemployment and it would be very expensive – in Greece, Europe as a whole and even in Germany.”
He also said it would be good if the euro zone’s permanent bailout mechanism, the European Stability Mechanism (ESM), successor to the European Financial Stability Facility (EFSF), was up and running as soon as possible.
Germany’s constitutional court has said it will deliver its ruling on whether the ESM and the fiscal pact are compatible with the German constitution on September 12th. Germany cannot legally ratify the two treaties without the go- ahead from the court and the ESM cannot come into effect without German backing.
Mr Draghi indicated earlier this month that the euro zone’s central bank may again start buying government bonds to reduce crippling Spanish and Italian borrowing costs, but not before September and only if governments activated the euro zone’s bailout funds to join the ECB in buying bonds.
Whether the plan goes ahead at all, however, remains largely a question of whether leaders in Germany – whose own central bank opposes bond-buying – agree over the course of a series of key meetings next month.
Whereas Mr Draghi said that Bundesbank chief Jens Weidmann had been the only ECB policymaker to register reservations against bond-buying at this month’s meeting, Mr Asmussen hinted that the division may not be as clear cut.
“No one should try to give the impression that the Bundesbank or its president is isolated,” Mr Asmussen said, adding that he and Mr Weidmann worked closely together and trusted each other. – (Reuters)
