Reuniting Europe

The European Commission today broke a taboo by not rejecting the assumption that Greece may leave not only the eurozone, but also the EU, because current treaties do not provide an exit from the euro.

Will Papandreou resign may be interesting in the moment I’m writing, but obviously he is finished.

His call for a referendum was a major mistake, another one was to lie that he had told EU leaders beforehand about his plan. Commission spokesperson Karolina Kottova today said the EU executive learned the news at the same time as we did, from newswires.

But Greece is not the problem. The EU and the eurozone would suffer a blow in case of a Greek disorderly default, Sarkozy may lose his country’s triple A and the elections next May, but Europe and the euro would survive.

I don’t think Greece will leave the EU, even if it returns to the Drahma. The EU is good at finding legal solutions to such problems.

The problem is Italy, as it is “too big to fail” and would trigger a tsunami effect across the eurozone, leaving little safe heaven. Berlusconi reportedly promised a confidence vote over his austerity measure two weeks from now. Having seen various Italian politicians doing their show in Brussels, I think what would reassure the markets is if he quits and if Mario Monti takes over in a caretaker capacity. We want Mario Monti as Pulcinella!

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