Date: May 15 2012
GERMANY has drawn up plans to make all 27 European Union members pay a share of the multibillion-dollar clean-up costs if Greece is ejected from the euro.
A finance ministry draft shows Berlin is preparing a fresh bailout to stabilise the Greek economy and stem Europe contagion after a return to the drachma, should Greece reject EU austerity demands.
The money would come from Europe’s rescue machinery but costs would be shared among all EU members — not just the eurozone — on the grounds Greece has a right to Brussels crisis money, like any other member state with its own currency.
The scheme aims to contain fallout from a Greek exit and ‘‘limit the losses of the European Central Bank’’ on its bonds.
The plan, leaked to Germany’s Der Speigel magazine, was disclosed as former EU Commission chief Romano Prodi said those threatening to eject Greece were playing with fire. ‘‘Exit would bring down the whole house of cards, with one state falling after another: it would reach Portugal, Spain, then Italy and France,’’ he said.
The fourth attempt in less than a week to form a government in Greece looked destined for failure last night, signalling weeks of instability before fresh elections that are likely to strengthen the hard left, which rejects the terms of Greece’s €240 billion ($A308.8billion) bailout and the restructuring of much of its national debt.
Last night, Greece’s biggest anti-bailout party, Syriza, defied overtures to join the government, deepening the impasse.
While eurozone finance ministers were due to meet overnight in Brussels, apparently at a loss over how to respond to political paralysis in Greece and a worsening crisis in Spain, all eyes are on new French leader Francois Hollande, who will go to Berlin for his first face-to-face meeting with German Chancellor Angela Merkel as soon as he is sworn in as President today.
Mr Hollande, Europe’s new champion of growth policies, lines up against Dr Merkel, the dominant cheerleader of austerity as the solution to the crisis. Dr Merkel, increasingly isolated if inherently strong in the European contest, has sustained a big setback with her Christian Democrats slumping to a crushing defeat in an election in the big German state of North-Rhine Westphalia.
Against a background of intense volatility, Europe has been pulled in opposing directions by voters’ protests and political paralysis deepening uncertainty over its future shape and gnawing away at the prospects for the euro’s survival as a 17-country union.
Ed Balls, the British opposition Labour Party spokesman on the economy, and former EU commissioner Lord Mandelson claim that the British government must commit with other European governments to a new growth strategy if the eurozone is to survive. They called for a ‘‘new political settlement’’ across Europe to achieve growth.
Protests in Spain, political stalemate in Greece, the crucial regional election in Germany and rising hostility to the EU in the Netherlands have all contributed to an air of crisis supplanting more than two years of financial panic and bitter argument over how to save the euro.
Eurozone finance ministers will meet in Brussels but are unlikely to decide much, given the political imponderables and the unresolved splits between German-led belt-tighteners and French-led proponents of growth policies as the answer to Europe’s troubles.
Opinion polls in the Netherlands for the first time showed the hard left, anti-European Socialist party as the strongest single party ahead of early elections in September.
Almost four in five Germans believed Greece should forfeit its bailout cash if it did not comply with stringent eurozone terms, a poll in tabloid Bildzeitung said.
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