Central bank Governor Perng Fai-nan (彭淮南) yesterday said the Greek prime minister’s unexpected decision to hold a national referendum on a European debt deal was like “throwing a bomb to financial markets and investors,” and it could continue to influence the real economy.
Major stock markets in Asia, including in Taiwan, fell yesterday following an overnight plunge on Wall Street amid fears that Greek Prime Minister George Papandreou’s decision could derail the eurozone’s plan to fix its crushing debt crisis. The TAIEX fell 0.31 percent, or 23.56 points, to close at 7,598.45, Taiwan Stock Exchange data showed.
“The decision reflected the Greek government’s hopes that the bailout plan will be supported by most of the people, as the conditional financial austerity program might keep increasing the unemployment rate and suicide rate in Greece,” Perng said during a question-and-answer session at the legislature.
Photo: Fang Pin-chao
However, Perng said the decision was irritating the global financial markets because investors are worried that through a referendum, it would be possible for the Greek public to reverse the debt plan and impact the financial strength of major creditors, including the UK, France, Germany and the US.
Furthermore, if Greece were to quit the euro, it might start a domino effect in Europe, leading to a substantial depreciation of the euro and the failure of the eurozone, which would hurt the economy as well, Perng added.
“I truly hope the euro doesn’t fail, because if that happened the economic recession in Europe would have a negative impact on the global economy,” Perng said.
Perng expects the Greek parliament will not pass the referendum because the opposition party in Greece, which accounts for half of the seats in the parliament, does not support the proposal.
Facing these rising uncertainties in the eurozone, the central bank will maintain the “dynamically stable order” of the New Taiwan dollar’s exchange rate, which fell NT$0.032 to close at NT$30.118 versus its US counterpart yesterday, Peng said, adding that a cross-strait currency settlement mechanism should be signed by the end of this year.
Council for Economic Planning and Development Minister Christina Liu (劉憶如) said the Greek prime minister’s unexpected decision indicated that Greece might refuse to take its medicine because of the plan’s stiff austerity measures.
However, without the current plan, Greece only has two other prescriptions — issuing euro bonds or exiting the eurozone — both of which the major European countries do not desire, Liu told a media briefing yesterday.
Therefore, if the Greek parliament approves a referendum and the bailout plan is rejected, major European economies, such as Germany and France, might have no other choice but to help Greece without the conditions of the bailout, Liu said.
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