Prime Minister Mario Monti of Italy said Friday that Greece’s government had made a “remarkable effort” to reach new austerity agreements with lenders to avoid a calamitous default, and that he did not believe that Greece would withdraw from the 17-nation group of European countries that use the euro currency, as some economists have forecast.
In a meeting with editors of The New York Times, Mr. Monti also said he believed that the euro zone would survive, in part because it was in the interests of Germany, its biggest and strongest member, to ensure such an outcome.
Mr. Monti, a prominent economist who is not a career politician, was recruited in November to help prevent Italy, the European Union’s third-largest economy, from falling into the same feared spiral of economic austerity and possible default that has afflicted the economy of Greece.
The crisis in Greece, where Prime Minister Lucas Papademos was facing new political turmoil on Friday over the demands of foreign lenders, has chronically raised fears of contagion in the other struggling economies of the euro zone, most notably Italy, Ireland, Spain, Portugal and, increasingly, France.
“I think Greece has made a remarkable effort,” Mr. Monti said. But he also acknowledged that Greece had not yet fully complied with the terms set out by the so-called troika — the International Monetary Fund, European Central Bank and European Commission — and he expressed concern “that the domestic political agreement on what has been presented is still shaky.”
As Greece has lurched from one financial crisis to the next over the past few years, speculation has intensified that it will quit the single-currency system, which by definition does not allow for unilateral currency devaluations to stimulate economic growth. But there is fear that if the Greeks were to withdraw from the euro zone, other weak members might do the same and cause the entire system to collapse, setting off an economic crisis that would extend far beyond Europe.
“I don’t believe they will exit the euro,” Mr. Monti said of Greece. In the highly unlikely event of such an outcome, he said, “there would be extremely strong political policy and political responses to prevent any such phenomenon to go beyond Greece.”
The main force for euro-zone unity, Mr. Monti said, comes from Germany, which had enormous economic interests at stake and would suffer hugely if other members regained “the freedom of competitive devaluations.”
(Source: NYT)
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