Sun, Jan 11, 2015 - Page 9 News List

EU countries get tough on Greece amid fears of exit from euro

By Liz Alderman  /  NY Times news service, PARIS

As a caustic election campaign in Greece revives fears that the country could leave the euro, European officials are taking an increasingly hard line toward Athens, saying they want to keep Greece in the single currency, though not at any cost.

The admonishments have stacked up in recent days — from Berlin, Paris and Brussels — intensifying what is shaping up to be another high-stakes standoff between Europe’s leaders and the eurozone’s most troubled country.

Since the previous acute Greek political crisis in 2012, European leaders have spent their time building firewalls against the kind of financial contagion that has rocked the continent before and their stiff warnings to some extent reflect their confidence that the eurozone would survive Greece’s exit.

Yet the turmoil in Greece is demonstrating its potential to rattle financial markets, adding an untimely sprinkling of anxiety to a heaping of external factors that helped drive the euro to a nine-year low against the US dollar on Monday.

To the evident dismay of European officials — and international markets — the narrow frontrunner for the Jan. 25 election appears to be Alexis Tsipras, head of the leftist SYRIZA party.

Although Tsipras has made it clear that he would like to keep Greece in the eurozone, he has also vowed to repudiate parts of the nation’s debt, roll back the austerity measures required by its international creditors and renegotiate deals with them that have given Athens access to billions in aid.

Following through on such pledges could cost Greece’s creditors — and European taxpayers — tens of billions of dollars, particularly if financial markets become strained by uncertainty.

The possibilities are once again raising an existential question for European leaders: What cost are they willing to bear to keep Greece in the eurozone? Their answer, for now, has amounted to a tough line, particularly from austerity-minded Germans.

On Monday, German Minister of the Economy Sigmar Gabriel said that Europe would not accept undermining the stability that has returned to the eurozone over the past couple of years.

“We aren’t vulnerable to blackmail,” he said in an interview with German newspaper Hannoversche Allgemeine. “We expect from the Greek government — regardless of who will form it — that the agreements made with the EU will be respected.”

Last week, German Minister of Finance Wolfgang Schaeuble cautioned Athens against moving away from its current economic reforms, saying: “If Greece takes another path, it will be difficult. Any new government will have to stick to the agreements made by its predecessor.”

In an acknowledgment of the delicacy of the situation, German officials on Monday quickly backed away from a weekend report by Der Spiegel magazine suggesting that German Chancellor Angela Merkel and Schaeuble believed that the eurozone could cope if Greece quit the euro and returned to the drachma.

A Berlin government spokesman denied that contingency plans had been made for such a possibility and insisted that Germany wants Greece to remain in the eurozone.

Officials in Brussels also emphasized on Monday that membership in the bloc was “irrevocable,” although they left open to what extent Athens could renegotiate the terms of its bailout after the election.

“The euro is here to stay,” European Commission spokeswoman Annika Breidthardt said.

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