GREEK CRISIS/ Economides (NYU): Lack of leadership in the EU leading to collapse
This week could be a crucial one for the question of Greece remaining in the Eurozone. It certainly did not begin well. The President of the Eurogroup, Jean-Claude Juncker, declared that the exit of Athens from the Eurozone “is technically possible”, even if the political risks would be “unpredictable”. Harsher words came instead from Germany, with the finance minister, Wolfgang Schäuble, stating that “it is inconceivable to develop a new plan for Greece”. A definitive no, therefore, to the possibility for Athens to receive a deferment on the plan of cuts imposed by the ECB-EU-IMF, as the Greek Prime Minister, Antonis Samaras, hoped. Samaras will meet Juncker on Wednesday before flying to Berlin to visit Angela Merkel on Friday. Greece remains crucial to the fate of the euro. It was the first country to ask for aid, to spark the infection in other countries, and now it may be the first to leave the euro, triggering a domino effect that could put an end to the common currency. To better understand the situation we asked Nicholas Economides, Professor of Economics at the Stern School of Business at New York University and a consultant to the U.S. Federal Trade Commission, for his opinion.
Professor, Greece’s outlook has been given a further downgrade while Eurozone finance minister group chief Juncker said that the exit of Greece would be manageable. Does this mean Greece will soon leave the euro?
I do not expect that Greece will leave the Euro. EU countries have taken a number of steps to reduce the impact of a potential Greek exit from the Eurozone. However, such an exit has still very substantial negative impact. Besides the quantifiable direct impact, there is a very substantial secondary impact. It was the secondary impact of Lehman’s collapse that was severely underestimated, and plunged the whole world in a deep crisis. Besides the direct and indirect financial impacts, there will very considerable political impact, since the leading Eurozone countries will appear as fools who are unable to successfully manage their affairs. A Greek exit could easily lead to other exits and the dissolution of the Euro as we know it.
What do you think about the behavior of EU politicians in managing the Greek crisis?