Greece Starts Preparing For Eurozone Exit

AP Photo/Michael Sohn
AP Photo/Michael Sohn

Greek authorities have started preparing for a possible Eurozone exit with contracts being drawn up for “payments in euros or any national Greek currency” as the government admitted yesterday the country was broke.

Since the Syriza government was elected to power, there have been ongoing discussions with the group of countries forming the monetary union and the European Central Bank.

The governing left-wing party was voted in on a platform of anti-austerity and renegotiating the terms of the bail out brought about by the sovereign debt crisis.

But alarm bells sounded after Gabriel Sakellaridis, a government spokesman, begged the ECB to ease restrictions on the Treasury to finance itself, warning ” “Liquidity is a pressing issue,” The Times reports.

While Mr Sakellaridis said the country would be meeting its international debt obligations including €970 million to the International Monetary Fund over the next week, fresh cash was needed to pay the bills at the end of the month.

“For us it is very important that liquidity is freed up as soon as possible. There is no more liquidity in the Greek economy,” he said.

“One can’t implement reforms efficiently in a state of financial asphyxiation.”

The next meeting of eurozone finance ministers on the 11th May is crucial for the country which has pleaded for extra funds during negotiations with creditors demanding domestic labour market reforms and pension cuts. Without a breakthrough at the meeting, the country will be bankrupt and pushed out of the currency union.

The Rethymno municipal port fund, in Crete, appears to be hedging its bets ahead of the meeting by referring to life outside the euro.  By including the clause mentioning “any national Greek currency at the time” they are indicating they believe there is a significant chance a settlement between the country’s government and the Troika will not be reached.

It is believed to be the first such clause issued in a Greek contract – but without a significant bend in the wills of either side it is unlikely to be the last as such news has a contagion effect.

Greece needs €7.2 billion in loans from the eurozone and IMF and Alexis Tsipras, the prime minister, is coming under pressure to make major concessions: however these would trigger a referendum.

This would not be the first time that the possibility of the country voting on its own wishes for the financial and economic future and independence of Greece will have been proposed. Former socialist prime minister George Papandreou is leading the calls for a vote on continued membership of the eurozone – something which in 2011 resulted in him being ousted from his job.

Writing in German newspaper the Frankfurter Allgemeine, he said: A referendum would force everyone to make a choice to accept reality and to assume responsibility. If reforms are agreed and consent is sought in a referendum, I am pretty sure that the answer of the Greek people would be a clear ‘yes’.”