Bank of England Governor Mark Carney warned about a Greek bailout in front of the Treasury select committee of British Parliament on Tuesday. It was the first time the committee had convened since Prime Minister David Cameron's Conservative Party won the general elections in May.
Carney's meeting with British Parliament followed on the heels of a new bailout deal for Greece reached on Monday that included pension cuts and higher taxes in exchange for $96 billion, or 86 billion euros, in bailout money. Greek Prime Minister Alexis Tsipras still needs his own parliament to approve the deal, but if the bailout is approved, Carney feared what the consequences would be for the U.K. and the eurozone more broadly.
Carney said in his financial stability report on July 1 that while British banks and businesses had limited exposure to Greece, "[the nation's] economic and financial exposure to the euro area is considerable."
In his conversation with parliament Tuesday, he highlighted the risk that both the debtors and creditors will be taking on if the bailout is approved. "There are big execution risks on all sides, including execution risk around the profile of the debt which in the judgement of the IMF and I believe other authorities, and we would share those judgements, is not sustainable in its current form," he said, according to Reuters.
Given the current bailout plan on the table, Carney said Greece would not easily be able to rebuild and develop its economy without debt relief, pointing out that a solution to the Greek crisis would require “herculean efforts from all sides.”
“The process by which this agreement was struck … underscores the scale of institutional shortcomings that still exist within the European Monetary Union and that’s something that’s no just my own opinion and that of colleagues at the Bank but the opinion of the five presidents including the president of the European Central Bank,” he said, as reported by The Independent.
Many have criticized the methods of the so-called troika of lenders -- The International Monetary Fund, The European Central Bank, and European Union governments -- for the continuing deterioration of Greece's economy.