EU planning for worst-case scenario with Greece

Date: Tuesday 12 Jun 2012

Although there has long been talk of European Union (EU) officials preparing a contingency plan for a Greek exit from the euro, the headlines were returning to the forefront on Tuesday as elections drew close and the Spanish bank bailout began to lose ground as a trending topic.

EU financial officials told Reuters that they have discussed such options as limiting ATM withdrawals, imposing Eurozone capital controls and imposing border checks just in case Greece ends up deciding to leave the region and exit the currency.

There is some worry that the radical left, anti-bailout party Syriza may come away as the winner of the elections in the Hellenic Republic on Sunday. Despites numerous assurances by Syriza’s leader Alexis Tsipras that the party wants to remain in the euro, some worry that his insistence on changes to the terms of the bailout agreed with the EU, IMF and ECB would force Athens to drop the single currency.

Nevertheless, it should be highlighted that rumours of such contingency plans have been going on for months and even the IMF Managing Director Christine Lagarde pointed out several weeks ago that being prepared for such an event was a requirement for her job.

“These are not political discussions, these are discussions among finance experts who need to be prepared for any eventuality,” the EU sources told the agency. “It is sensible planning, that is all, planning for the worst-case scenario,” they said.

JM

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