Comment on Europe's impossible dilemma: let Greece stay or let it go?

Danny Kemp, Business Insider
Sun, 07/05/2015 - 4:36pm

Europe's impossible dilemma: let Greece stay or let it go?

Brussels (AFP) - Europe faces a near impossible choice between giving debt-laden Greece a chance or pushing it out of the euro and risking global turmoil, analysts said Sunday, after Greek voters overwhelmingly rejected international creditors' terms.Berlin, Paris and Brussels all warned in the run-up to Sunday's referendum that a 'No' vote to the EU-IMF reform demands was a 'No' vote for the single currency and a return to the drachma.Some analysts say the cold reality of a possible "Grexit" may make some leaders agree with Prime Minister Alexis Tsipras that the shock result does not necessarily have to mean a break with Europe."EU member states will give Greece another chance, but there is very little time and this will really be the last chance," Nicolas Veron of the Bruegel think-tank in Brussels told AFP.He said a Greek exit from the 19-country currency union could come about "very rapidly" if action was not taken quickly.The referendum result -- a rejection of more austerity after five years of pain for Greece, came as a surprise to many European governments -- because "lots of people were relying on the rationality of the process, and confused their desires for reality," he added.The creditors face a difficult choice between trying to avoid the risk of contagion from a Greek euro exit -- plus the political and symbolic implications of the loss of a historic European nation from the club -- or sticking to their austerity guns.- 'Prepare for drachma' -The radical leftist government led by Tsipras and his Syriza party has been at loggerheads with its creditors since it was elected in January on a tough anti-austerity platform. Talks broke down last week when the eurozone refused to extend Greece's bailout past June 30, and there are still few signs that the other 18 members of the currency club are willing to compromise.Eurozone leaders are to hold a special summit on Tuesday in Brussels which could well be the last chance to reach some kind of deal before the European Central Bank cuts off emergency liquidity assistance (ELA) to Greece's struggling banks.Slovakia's Finance Minister Peter Kazimir poured cold water on the chances of success, saying that the "nightmare of the 'euro-architects' that a country could leave the club seems like a realistic scenario after Greece voted 'No' today.""I think it's going to lead to Grexit," Pieter Cleppe of the Open Europe think-tank told AFP. "The EU doesn't want to be seen as the one pulling the trigger.

 

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