A Greek exit from the Eurozone is unavoidable, warns ex-head of US central bank

Greece will eventually have to leave the Eurozone, according to the ex-chairman of the Federal Reserve. 

 

Alan Greenspan, who was head of the US central bank from 1987 to 2006, told the BBC he did not believe the other members would continue to make concessions for the struggling nation. 

 

Since the radical left-wing Syriza party was voted in at Greece's general election last month, Greek ministers have been travelling around Europe trying to convince other countries to renegotiate its bailout agreement.

 

Alexis Tsipras, leader of the party, promised voters he would change the terms of the €240bn (£182bn) rescue by the European Union, ECB, and International Monetary Fund. At the same time, he said he wanted Greece to remain part of the Eurozone. 

 

But the plan does not appear to have made much progress so far, as most European countries have remained intransigent to the demands. A document seen by Reuters prior to a meeting of the Eurozone's finance ministers reveals how Germany wants Greece to stop further privatisations and backtrack on its promise to raise minimum wage. 

 

Syriza has adapted its requirements and no longer demands a write-off of debt to other member states, but Greenspan believes the problem will not be resolved until Greece actually leaves the Eurozone.

 

"I believe [Greece] will eventually leave. I don't think it helps them or the rest of the Eurozone – it is just a matter of time before everyone recognises that parting is the best strategy,” he said.

 

He added that to make the Eurozone work, integration would need to take place beyond the level of a fiscal union: "The problem is that there there is no way that I can conceive of the euro of continuing, unless and until all of the members of Eurozone become politically integrated – actually even just fiscally integrated won't do it."

 

If Greece did end up leaving, it would cause severe problems for the UK, according to chancellor George Osborne. Following a meeting with Greek finance minister Yanis Varoufakis in London earlier this week, he told Reuters: "We had a constructive discussion, and it is clear that the stand-off between Greece and the Eurozone is the greatest risk to the global economy.”

 

“It is a rising threat to the British economy. And we have got to make sure that in Europe as in Britain, we choose competence over chaos,” he added.