Greece’s exit from the eurozone is inevitable, Alan Greenspan, a former chairman of the U.S. Federal Reserve, said in an interview with BBC News Sunday. Greenspan forecast the attempt by the new Greek government to renegotiate the country’s economic bailout terms would likely be resolved only by the nation leaving the eurozone, a scenario that would increase the risk of a “much bigger breakup” of the economic union.
“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 recognizes that parting is the best strategy,” he told BBC News. “The problem is that there there is no way that I can conceive of the euro ... continuing, unless and until all of the members of eurozone become politically integrated -- actually even just fiscally integrated won’t do it.”
Newly elected Greek Prime Minister Alexis Tsipras is set to detail his left-wing government’s economic policies Sunday in a speech that is likely to indicate its rejection of any additional austerity measures by his debt-laden country’s eurozone partners, Reuters reported. European Union leaders will be closely watching the speech amid fears Tsipras’ government will backtrack on the economic reforms that have been a condition of the €240 billion ($272 billion) of assistance his country has received in bailout money.
With the Feb. 28 expiration date of Greece’s current bailout period approaching fast, the new government has already signaled it will not apply for an extension and commit to the reforms, as expected by its lenders. The EU, the European Central Bank and the International Monetary Fund had imposed strict austerity cuts as conditions of their bailout of the country, something Tspiras’ Syriza government has vowed to fight, as noted by Reuters.
Tsipras and Finance Minister Yanis Varoufakis spent the past week meeting with their counterparts around Europe to argue that an end to austerity would do more for Greece’s economic recovery than would cuts, but their message has not been received positively by some leaders, according to the Guardian. In fact, German Finance Minister Wolfgang Schaeuble doubled down on his government’s insistence that Athens stick to the deficit-cutting agenda at the end of a meeting last week.
Germany and other European lenders are unlikely to be willing to put up more loans to bolster Greece, according to Greenspan, who has expressed skepticism about the viability of the European monetary union in the past. He warned in his BBC News interview Sunday that efforts to hold the 19-country eurozone together were just “putting strain on everybody.”