Officials from the IMF, the European Union and the European Central Bank are in Athens hoping to wrap up in the next few days what could be the biggest bailout in history.
But Germany’s reservations about handing over cash to what it sees as a profligate Greece could yet see the Greek economy in ruins.
Euronews asked the Chief Economist of the London-based think-tank Centre for European Reform Simon Tilford how close the eurozone is to collapse.
“That’s certainly over-egging the pudding. I think that there are some legitimate doubts about the sustainability of the current membership of the eurozone, but to talk about the eurozone cracking or unravelling at this time is excessively alarmist.
Some debt re-structuring, re-scheduling in the Greek case is inevitable. Contagion to Portugal is not just a possibility, it’s already happening. And unless the markets settle down, unless the EU can take the necessary action to reassure the markets, then I think we’ll see a continuing increase in risk averseness vis-a-vis Portuguese assets and Portugal could find itself quite easily in a similar position to Greece.”
“What role is being played by the ratings agencies in all this? They put their hand into the ring yesterday and the day before by downgrading Greece, Portugal and Spain. Explain to me why a group of discredited economists in New York have such a disproportionate influence on the economies of Europe.”
“Banks should not have been making huge commercial decisions on the basis of the ratings produced by these agencies. I’m not convinced that replacing them with a state-sponsored, EU ratings agency would be an enormous improvement. I think the potential there for it to be politically compromised would be considerable. But clearly there does need to be reform of the ratings agencies, and I think the timing of the (recent) downgrade announcements was very unhelpful.”