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Greece denies report it's seeking to leave euro

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Greece denies report it's seeking to leave euro

Post  Admin on Sat May 07, 2011 2:47 am

ATHENS, Greece – Finance ministers from several European countries met Friday amid concerns over Greece and Portugal, as Greek and other European Union officials vehemently denied a German online magazine report that Athens was considering leaving the eurozone.

Greek Finance Minister George Papaconstantinou attended the informal meeting in Luxembourg called by Luxembourg Prime Minister and Eurogroup head Jean-Claude Juncker, the ministry said in Athens.

The talks were held "in the framework of the meeting of eurozone finance ministers who participate in the G-20 and the finance minister was called to participate for an exchange of views regarding the financial developments in Greece," the ministry said in a statement.

"It is absolutely evident that in these talks there was no discussion nor was any issue raised concerning Greece's participation in the eurozone, as various foreign media outlets said irresponsibly and for their own reasons," it said.

Earlier, the ministry categorically rejected the report by Spiegel Online, which said Athens was considering withdrawing from the EU's joint currency. The report, which sent the euro tumbling, added that the eurozone's finance ministers were holding a secret crisis meeting in Luxembourg on Friday night to discuss the issue.

The euro dropped to $1.4470 from $1.4530 late Thursday. It had traded at $1.4942 on Wednesday, its highest level since December 2009.

"The report on an imminent Greek exit from the eurozone, as well as being untrue, has been written with incomprehensible levity despite the fact that this has been repeatedly denied by the Greek government, and the governments of other EU member states," the Finance Ministry said. "Such reports are a provocation, undermine efforts by Greece and the euro and serve speculative games."

Steffen Seibert, spokesman for German Chancellor Angela Merkel, said that "there is a meeting of some finance ministers that has long been planned. Greece exiting the eurozone is not on the agenda of that meeting, and it has never been."

A German government official said the Spiegel Online report was "completely unfounded." He confirmed that a small and informal ministerial meeting of a few eurozone members was taking place in Luxembourg, adding that participants were to discuss "a broad array of economic topics," such as the euro and the European Stability Mechanism, the eurozone's future bailout fund that will come into force in 2013, as they have in the past.

The official spoke on condition of anonymity because he was not allowed to discuss details of the meeting.

European finance ministers are known to meet from time to time outside their regular monthly get-togethers to more informally discuss issues in the eurozone.

It was unclear which other officials were at the talks. French Finance Minister Christine Lagarde was "working" on Friday night, a ministry official said in Paris, but refused to divulge her whereabouts. He spoke on condition of anonymity in line with government policy.

Greece was rescued from the brink of bankruptcy in May last year by a euro110 billion ($159.51 billion) package of bailout loans from the other eurozone countries and the International Monetary Fund. In return, it has imposed a strict austerity policy. Since then, Ireland and more recently Portugal have also received similar bailouts.

However, despite the rescue loans, the country has failed to get its struggling economy growing again and cut its budget deficit according to the targets set out in the bailout program.

Speculation has swirled in recent days and weeks that Greece will have to eventually restructure its debt, by stretching out payments or even reducing principal. Most economists say the country will not be able to service its debt in the long term, which stands at more than euro340 billion, more than 140 percent of economic output. Both the government and EU officials have repeatedly denied that a restructuring is on the cards.

Papaconstantinou earlier this week called on Greece's creditors to give the country more time to repay its bailout loans and lower interest rates even further, after they already eased the loan terms in March.

Analysts say that the eurozone needs to start thinking about a Plan B in case the bailouts fail to solve the crisis in the currency union.

"It would be irresponsible for creditor countries not to be seriously discussing the many issues to do with Greece, Portugal and Ireland," Sony Kapoor, the managing director of financial-reform think tank Re-Define, said of the finance ministers meeting. He dismissed the reports about a Greek exit from the currency union as "a vicious rumor."

Economists say trying to leave the euro could provoke a huge financial crisis, as investors rush to sell assets before they can be re-denominated in national currency and devalued. It would also open the country that leaves to political retaliation from unhappy fellow EU members.

Greece's problems are by far not the only unresolved issues in the eurozone. The meeting comes just days after officials from the EU and the International Monetary Fund agreed on a euro78 billion ($113 billion) bailout for Portugal. However, the deal still has to be approved by eurozone finance ministers — a step that has been thrown into doubt by recent elections in Finland, where a euro-skeptic, anti-bailout party won almost 20 percent of the vote. A "no" from Finland could block any loans from going to Lisbon.

The political standoff in Helsinki has also delayed a deal on a planned increase of the eurozone's existing bailout fund as well as finalizing the plans of the future fund, the ESM.

The euro began in 1999 for accounting purposes and cash was introduced in 2002. It has grown from the original 11 members to 17 countries, with Estonia the latest to join, on Jan. 1.


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