STOCK MARKET WATCH - Thursday, 5 January 2012

[Demeter]

54. Greece warns it will have to leave eurozone if it cannot clinch £100bn bailout deal

http://www.dailymail.co.uk/news/article-2081721/Greece-warns-leave-eurozone-clinch-100bn-bailout-deal.html

Opinion polls suggest Greek voters want the government to stay in the euro even if they disagree with deficit reduction measures...Greece last night raised the prospect of leaving the euro and returning to the drachma.
It came amid new warnings that botched attempts to keep the single currency together are dragging Europe deeper into recession. Senior officials in Athens said that unless they could successfully complete negotiations with creditors on a second bailout package worth 130billion euros (£109billion), Greece would be unable to stay in the euro. The new, Brussels-approved government in Greece is struggling to gain support for austerity measures required by EU and International Monetary Fund bosses. Until now, Athens has refused to countenance leaving the eurozone, and yesterday’s warning appeared designed to try to frighten Greeks into supporting public spending cuts and tax rises.


Greece has a huge budget deficit and debt mountain and is being kept afloat by a 110billion euro (£92billion) bailout agreed in May 2010. An additional bailout was agreed last October, when it became clear that the first batch of funds would not suffice, but that deal has yet to be finalised. Sorting out the details is the main task of the new coalition government headed by former central banker Lucas Papademos, whose mandate is expected to expire in early April.

Government spokesman Pantelis Kapsis said negotiations over the next three or four months with debtors will ‘determine everything’, including whether Greece escapes a catastrophic bankruptcy. ‘This loan agreement must be signed, otherwise we are outside the markets, out of the euro and things will become much worse,’ he said.

But Conservative MEP Daniel Hannan said attempts to keep the single currency together no matter what, led by German chancellor Angela Merkel and French president Nicolas Sarkozy, were dragging the Continent into recession. ‘The reason that the eurozone faces such hard times is that its leaders have decided to keep the single currency together at any cost,’ he said. ‘The coming recession is not some inexorable force of nature; it is a consequence of the policies being pursued by 'Merkozy'… and the rest.’