German Chancellor Angela Merkel believes the Eurozone can bear a possible Grexit but worries about geopolitics, German senior officials said, according to Euro Insight. Europe’s Iron Lady appears determined to prevent Greece’s exit from the single currency by accident, amid rising tension between Athens and Berlin.
As the same sources indicate, if Greece was to leave the euro, it would be due to not enough common ground found between Eurozone member-states rather than missing targets regarding its debt repayment deadlines or reform commitments that have already been set by its international creditors. “This is a political decision, there will be no ‘Graccident,’” an official declared, using the term brought up lately by German Finance Minister Wolfgang Schaeuble to describe the possibility of Greece leaving the euro as a result of misunderstandings and political differences.
At the same time, the German Chancellor appears much more concerned of the possible geopolitical consequences of such a development, as the single currency bloc is now better equipped to handle market turbulence in case of a Grexit. Her reasoning is based on the fact that the traditionally unstable region of southern Balkans could be destabilized and Greece, which is also a NATO member, could fall under the influence of Moscow.
That is the reason the German government is reportedly ready to back unorthodox solutions to prevent a Greek default, despite the latest war of words between Athens and Berlin. These are said to include increasing the limits of short-term t-bills that Athens could issue and sell to Greek banks and then post them as collateral with the European Central Bank (ECB), temporary capital controls in case of a bank-run, paying out funds from the current program ahead of schedule and delaying debt repayments to the International Monetary Fund (IMF). In addition, Berlin is even ready to agree on a lower primary surplus target and leave Greece more leeway when it comes to defining and implementing reforms, and later, also on a possible reduction of the Greek debt.
As the officials underlined, though, such supportive moves would only be granted if there is an intra-European political agreement that Greece remains a member of the 19 nations’ single currency area, which, from the German perspective, requires a clear commitment to implement reforms and accept the established bailout infrastructure.
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