European finance officials have discussed as a worst-case scenariolimiting the size of withdrawals from ATM machines, imposing borderchecks and introducing capital controls in at least Greece shouldAthens decide to leave the euro. EU officials have told Reuters the ideas are part of a range of contingency plans. Theyemphasized that the discussions were merely about being preparedfor any eventuality rather than planning for something they expectto happen - no one Reuters has spoken to expects Greece to leavethe single currency area. Belgium's finance minister, Steve Vanackere, said at the end of Maythat it was a basic function of each euro zone member state to beprepared for problems. These discussions appear to be in that vein. |
But with increased political uncertainty in Greece following theinconclusive election on May 6 and ahead of a second election onJune 17, there is now an increased need to have contingencies inplace, the EU sources said. The discussions have taken place in conference calls over the pastsix weeks, as concerns have grown that a radical-left coalition,SYRIZA, may win the second election, increasing the risk thatGreece could renege on its EU/IMF bailout and therefore move closerto abandoning the currency. No decisions have been taken on the calls, but members of theEurogroup Working Group, which consists of euro zone deputy financeministers and heads of treasury departments, have discussed theoptions in some detail, the sources said. As well as limiting cash withdrawals and imposing capital controls,they have discussed the possibility of suspending the Schengenagreement, which allows for visa-free travel among 26 countries,including most of the European Union. "Contingency planning is underway for a scenario under which Greeceleaves," one of the sources, who has been involved in theconference calls, said.
"Limited cash withdrawals from ATMs andlimited movement of capital have been considered and analyzed." Another source confirmed the discussions, including that thesuspension of Schengen was among the options raised. "These are not political discussions, these are discussions amongfinance experts who need to be prepared for any eventuality," thesecond source said. "It is sensible planning, that is all, planningfor the worst-case scenario." The first official said it was still being examined whether therewas a legal basis for such extreme measures. "The Bank of Greece is not aware of any such plans," a central bankspokesman in Athens told Reuters when asked about the sources'comments. The vast majority of Greeks - some surveys have indicated 75 to 80percent - like the euro and want to retain the currency, somethingGreek politicians are aware of and which may dissuade them frompushing the country too close to the brink.
However, SYRIZA is expected to win or come a strong second on June17. Alexis Tsipras, the party's 37-year-old leader, has said heplans to tear up or heavily renegotiate the 130-billion-eurobailout agreed with the EU and IMF. The EU and IMF have said theyare not prepared to renegotiate. If those differences cannot be resolved, the threat of the countryleaving or being forced out of the euro will remain, and hence theneed for contingencies to be in place.
Switzerland said last month it was considering introducing capitalcontrols if the euro falls apart. In a conference call on May 21, the Eurogroup Working Group toldeuro zone member states that they should each have a plan in placeif Greece were to leave the currency. Belgium's Vanackere said two days after that call that it was abasic function of each euro zone member state to be prepared forany eventuality. "All the contingency plans (for Greece) come back to the samething: to be responsible as a government is to foresee even whatyou hope to avoid," he told reporters.
"We must insist on efforts to avoid an exit scenario but thatdoesn't mean we are not preparing for eventualities. (Additional reporting Martin Santa and George Georgiopoulos.Writing by Luke Baker. Editing by Jeremy Gaunt.).
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