By Tyler Durden on 05/11/2012 09:39 -0400
Oh yeah….. Greece.
As already pointed out, first we had Fitch and then various European ladies and gentlemen, all lining up one after another, to talk down the event that as recently as 4 months ago would presage the apocalypse of Europe: i.e., Grexit, or the country’s exit from the Eurozone. And now that a second Greek elections is inevitable (as we expected a week ago), and with Syriza likely to surpass 30% of the vote alone in the next two weeks, all hope appears to be lost for preserving Greece in the EMU. Europe’s reaction? Why talk it down of course.
German Finance Minister Wolfgang Schaeuble suggested the euro area could handle Greece dropping out, raising pressure on Greek political leaders struggling to form a government amid a rise in anti-bailout sentiment.
“We have learned a lot in the last two years and built in protective mechanisms,” Schaeuble told the Rheinische Post newspaper in an interview published today, when asked whether the euro area is girded for a Greek exit. His comments were confirmed by the Finance Ministry in Berlin.
“The risks of contagion for other countries of the euro zone have been reduced and the euro zone as a whole has become more resistant,” Schaeuble said. “The notion that we wouldn’t be able to react in a short time to something unforeseen is wrong.”
“The future of Greece in the euro zone now lies in Greece’s hands,” German Foreign Minister Guido Westerwelle said in a speech in the lower house of parliament in Berlin today. “Solidarity is not a one-way street” and aid to Greece can only be disbursed if Greece sticks to its part of the deal.
“We have to tell our Greek friends and partners honestly, fairly and openly that there is no way other than the one we jointly agreed,” Schaeuble said. Other European governments and private investors have gone “extraordinarily far” in making concessions, so Greece “has to understand that must fulfill its commitments in return.”
A Greek exit from the euro zone would be catastrophic not just for Greece, the head of the euro zone’s temporary rescue fund said on Monday, a day after pro-bailout ruling parties lost their majority in parliament in Athens.
If Greece exited the euro zone that would “of course have a huge impact not just for other program countries, not just for the banks, but also for Greece itself,” Regling said, adding Greece’s public creditors would also suffer. “It would be a catastrophe for Greece.”
Regling also said it was completely out of the question that the European Stability Mechanism (ESM) would directly recapitalize banks, a proposal by some policymakers to help Spanish banks.
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