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Euro exodus?

May 8, 2011

One of Germany's top economists has said that Athens will be unable to solve its debt crisis if it keeps the euro currency. The German public, too, is upset over the billions being spent to keep Greece afloat.

A Greek one-euro coin
Will the Greek euro soon become a thing of the past?Image: picture-alliance/dpa

As rumors of Greece's impending exodus from the eurozone continued to circulate around the bloc, a top German economist said on Sunday, May 8, that Athens had no other choice but to abandon the euro currency if it wanted to avert long-term economic ruin.

Hans-Werner Sinn
Sinn says Greece must exit the euro for its own goodImage: picture-alliance/ dpa

"If Greece were to exit the euro, it would be able to devalue its currency and thus become competitive once again," Hans-Werner Sinn, head of the Munich-based Institute for Economic Research, said in the Sunday edition of the Frankfurter Allgemeine newspaper.

According to Sinn, heavily-indebted Greece was heading for a banking crisis whether it kept the euro or not. If Athens, however, stayed with the euro, the economist claims, there would be no way to rescue the economy in the long run.

"If Greece decides to attempt a so-called internal devaluation - that is by cutting salaries and prices within the country - it would risk setting off civil war," Sinn said. "Greece is heading for economic crisis in either scenario. But if it stays in the eurozone, Athens will kill off the companies that make up its economy."

Private eurozone meeting

Greek Prime Minister George Papandreou
Papandreou told the EU to 'leave Greece alone'Image: AP

Sinn's comments came a day after a private meeting of select eurozone finance ministers in Luxembourg that focused on the future of the currency in the face of Greece's inability to solve its sovereign debt crisis.

Jean-Claude Juncker denied a report published on Germany's Spiegel Online news website that the talks were held to discuss the possibility, raised by Athens, of Greece withdrawing from the 17-member eurozone, as well as the idea of restructuring Greece's 327-billion-euro ($470-billion) sovereign debt.

"We have not been discussing the exit of Greece from the euro area," he told reporters. "This is a stupid idea. It is an avenue we would never take."

Juncker said that a meeting of all eurozone finance ministers on May 16 would discuss whether Greece needed a further economic plan, beyond the 110-billion-euro bailout Athens was granted by the EU and IMF in May last year.

"We think that Greece does need a further adjustment program," Juncker added at the close of the meetings.

Germans opposed to Greek bailout

A beggar in Greece
Only one in five Germans thinks the Greek bailout is 'correct'Image: picture alliance / dpa

In response to the Luxembourg meeting, as well as to the media reports suggesting Athens' exodus from the euro, Greek Prime Minister George Papandreou urged "the EU in particular, to leave Greece in peace to do its job," while Finance Minister George Papaconstantinou later warned that Athens may need more hard cash support.

Without naming its source, French business daily Les Echos said on Sunday that the Greek government could receive another 20-25 billion euros from the EU if its series of austerity measures, including cuts and accelerated state sell-offs, failed to generate necessary capital.

Meanwhile, a survey published on Sunday indicated that the German people were widely against the bailout of Greece one year after it was agreed by the EU and the International Monetary Fund.

German daily Welt am Sonntag showed that only one in five Germans believed the bailout was acceptable. Forty-seven percent of those asked said the move was "false," and 33 percent were undecided.

Author: Gabriel Borrud (AFP, dpa)
Editor: Toma Tasovac