The departure of Greek prime minister George Papandreou edged closer today, 6 November, even as Goldman Sachs Asset Management head Jim O'Neill said in an interview with UK newspaper The Sunday Telegraph that fiscal integration led by Germany could push more countries out of the eurozone.
The departure of Greek prime minister George Papandreou edged closer today, 6 November, even as Goldman Sachs Asset Management head Jim O’Neill said in an interview with UK newspaper The Sunday Telegraph that fiscal integration led by Germany could push more countries out of the eurozone.
Papandreou’s departure looked all but set given continuing demands from Greece’s New Democracy party leader Antonis Samaras that his participation in a new government being called for by Greece’s president Karolos Papoulias would rest on Papandreou’s resignation.
What remains uncertain is to what extent this would put Greece on a path to accepting unequivocally the deal thrashed out by the EU to help pay off the country’s debts – including forcing banks holding Greek debt to accept a 50% haircut.
Last week’s call by Papandrou for a – now dicredited – referendum on the deal in Greece threw global markets into turmoil and raised the possibility that Greece would have to leave the eurozone.
That idea has been picked up by O’Neill, who told the UK newspaper that “The Germans want more fiscal unity and much tougher central observation – with the idea of a finance ministry.”
“That will emerge for those that want to stay in this damn thing, or can stay in.
“With that caveat, it is tough to see all countries that joined wanting to live with that -including the one that is so troubled here [Greece]. If you wind the clock back, it was pretty obvious that economically probably only Germany, France and Benelux of the original joiners were the ones that were ideal for a monetary union.”For [them] it is not a bad idea – these countries have always had some kind of tight fixing of exchange rates and are very intertwined. For all the rest that originally joined – Spain, Italy, Portugal, Ireland, Finland – it is actually questionable.”
Italy and Finland were picked out in particular by O’Neill, because of their proximity to non-eurozone members of the EU – the UK and Sweden respectively.
The Sunday Telegraph adds that the chairman of the supervisory board of China Investment Corporation, the country’s sovereign wealth fund, again stated that there was little if any reason for China to participate in funding the EU’s rescue plan for Greece. He suggested that there was little incentive to help Europeans because Europeans themselves had little incentive to work given the existence of welfare states.