Euro zone countries, such as Ireland, who had to impose major spending cuts, will find it difficult to understand if Greece is now allowed to escape reforming its society, the British chancellor of the exchequer, George Osborne has said.
Facing questions in the House of Commons, Osborne said the Greeks joined the single currency, accepted its rules and “cannot take unilateral action”, though he urged both sides to find a “sustainable” solution.
So far, the British remain on the sidelines in the crisis, though Osborne was quick to assure MPs that London does not face the prospect of having to contribute to a last-minute bailout by the International Monetary Fund.
The Greeks are in arrears to the IMF and, therefore, cannot get further assistance from the Washington-based organisation, said Osborne, who defended its head, Christine Lagarde over her criticisms of Greece.
Debt write-offs in the 1950s that benefited Germany were not given without conditions, he told MPs, adding that it had to sign up to reforms to ensure that its economy could be successful in the future.
Raising taxes
Greece has always had a problem raising taxes: “This Greek government and past ones talked about changing the system. Unfortunately, one of the things that has happened is that Greek tax-raising has almost dried up,” he said.
Efforts are being made to protect British pensioners living in Greece, Osborne told the Commons . Around 2,000 people have been directly contacted by the British foreign office. Some have been told that they can have their pensions paid into UK-based, rather than Greek, bank accounts.
He encouraged those intending to visit Greece on holidays to go ahead with their plans. He said that people who are already there are enjoying their break and able to use their credit cards: “Just remember to take plenty of cash,” he advised.
However, Osborne, who spoke earlier with Lagarde and the eurogroup president, Dutch finance minister, Jeroen Dijsselbloem, also struck a pessimistic tone: "There is considerable uncertainty about what happens next.
“We need to be realistic: the prospect of a happy resolution to this crisis is, sadly, diminishing,” he said, “This is a critical moment in the economic crisis in Greece. No one should be under any illusions: the situation risks going from bad for worse.”
British prime minister David Cameron chaired a meeting on the potential fall-out from the Greek referendum vote with senior ministers and officials, including the governor of the Bank of England Mark Carney.
Cameron discussed the crisis briefly with the German chancellor, Angela Merkel before her Paris meeting with French president, François Hollande.
