Swedish Finance Minister Anders Borg said that Greece might leave the monetary union in the next six months, according to Bloomberg. “Greece is likely to leave the eurozone and I do not exclude that this will happen in the next half year,” said Borg, who was in Tokyo at the annual conference of world finance leaders.
Borg’s statement comes two days after the EU received the Nobel Prize for Peace in the midst of an unprecedented financial crisis and a few days after German Chancellor Angela Merkel’s visit to Athens, where she was greeted with protests . Merkel said, however, that Greece wants to remain in the euro area.
Negotiations for the release of a new tranche of the foreign loan were also suspended in September, to give Prime Minister Antonis Samaras time to make budget savings of almost €10 billion as promised.
EU leaders will meet in Brussels on October 18 and 19 to discuss the ECB plan to monitor European banks, and the tighter control of Brussels on national budgets. Borg explained that an exit of Greece from the euro area will not likely have much impact on the financial system” since everyone already understood which way the wind blows.”
Given the lack of competitiveness of the industry and inability to implement necessary reforms “it is unlikely they will be able to boost competitiveness by a significantly lower exchange rate,” said Borg. It is not the first time that the Swedish official expresses pessimism about Greece. In July, Borg said that “some sort of bankruptcy” is the most plausible scenario for the Greek state.
Troika experts want to give Greece another two years to implement reforms. On the other hand, the German magazine Der Spiegel writes that the troika experts of Greece’s international creditors determined that the Greek state needs two more years to implement the difficult structural reforms and they should give Greece this respite.
The Troika composed of representatives of the IMF, European Commission and European Central Bank (ECB) last week urged eurozone finance ministers to give Greece another two years to meet its commitments as the Athens authorities requested.
Extension from 2014 to 2016 would allow Greece to put into practice spending cuts and structural reforms, without shifting the burden to an economy already in recession. IMF is ready to support this view, while some eurozone countries, reluctant to grant loans, require further efforts from Greece.
The Athens government considered that savings of €7.8 billion are sufficient, while this weekend negotiations with Troika representatives refer to €9.2 billion, according to a Greek finance ministry source. Discussions should reach an outcome before the EU summit on October 18.
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