The former chief of the U.S. Federal Reserve says it is just a matter of time before the European Union implodes, along with its currency, following what he believes will be a “Grexit” — a Greek exit — from the EU.
In a recent interview with the BBC, former Fed Chairman Alan Greenspan said he did not see a scenario in which the EU or its lending institutions, including its own central bank, would risk loaning the economically struggling nation more money, especially after its new far-left leadership came to power vowing to scrap current austerity measures called for in a previous loan package.
Greek finance officials are seeking to renegotiate the country’s prior bailout loan, which amounts to more than $250 billion, but Greenspan said, “I don’t think it will be resolved without Greece leaving the eurozone.”
Such a departure is worrying to British officials as well, the BBC noted.
‘All cards being held by the Eurozone’
Greenspan, head of the Fed from 1987 to 2006 — the Reagan, Clinton and George W. Bush years — added, “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.”
“The problem is that there is no way that I can conceive of the euro of continuing, unless and until all of the members of eurozone become politically integrated – actually even just fiscally integrated won’t do it,” he added.
The BBC further reported:
Following the election in Greece of the anti-austerity Syriza party, Greek ministers have been touring European capitals trying to drum up support for a re-negotiation of its bailout terms.
However, there appears little willingness in Berlin, or at the European Central Bank, to alter the terms of its €240bn (£182bn) rescue by the European Union, ECB, and International Monetary Fund.
“The [bailout] conditions with Greece were generous, beyond all measure,’ German Finance Minister Wolfgang Schaeuble said last week,” the British network reported, adding that he could think of no justification for relaxing them further.
“All the cards are being held by members of the eurozone,” Greenspan said, adding that the attempt to keep the 19-nation bloc together “is putting strain on everybody.” Besides the danger of Greece leaving the zone, he said there was a legitimate chance of southern European nations also bailing out, meaning a “much bigger break-up” could be looming.
Not all financial experts are lining up behind Greenspan’s prediction.
Returning to the “free” programs that got Greece in financial trouble to begin with
“Alan Greenspan has long been a critic of the European single currency. Now, the 88-year-old former chairman of the US Federal Reserve has repeated a claim that nothing short of full political union – a United States of Europe – can save the euro from extinction,” wrote the BBC’s business correspondent, Joe Lynam. “Given that few (if any) of the current 19 sovereign governments which make up the eurozone would choose to create such an entity at this time, that means – for Greenspan at least – the euro is doomed.”
But he added that Greenspan has been wrong before, and that the former Fed chairman admits that a Greek exit would be more manageable now then when the country first got its bailiout in 2010.
Greek Prime Minster Alexis Tsipras is looking for a short-term financial deal that will enable Greece to pay its way while renegotiating the austerity cuts that were put in place as part of the bailout. The current bailout is scheduled to end February 28.
In his first major speech to parliament since his far-left Syriza party came to power, he vowed to stick with campaign promises, which include providing free food to the nation’s poor, as well as electricity. Also, he vowed to cut benefits for politicians like government automobiles for ministers and that he would battle corruption and tax evasion.