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‘Grexit’ would be manageable, but very costly – ECB official

Published time: August 20, 2012 12:06
Edited time: August 21, 2012 12:05
A Greek flag waves next to a statue of the Greek ancient god Apollo in Athens.(AFP Photo / Aris Messinis)

A Greek flag waves next to a statue of the Greek ancient god Apollo in Athens.(AFP Photo / Aris Messinis)

A Greek exit from the eurozone would be manageable but very expensive, not only for the crisis-troubled country, but for the whole region, European Central Bank policymaker Joerg Asmussen said ahead of the German and Greek foreign ministers’ meeting.

"Firstly, my clear preference is that Greece should remain in the currency union," Asmussen said in an interview to Germany's Frankfurter Rundschau daily. "Secondly, it is in Greece's hands to ensure that. Thirdly, a Greek exit would be manageable."

However, Asmussen warned that a so-called ‘Grexit’ would not be as painless as it seems. “It would be associated with a loss of growth and higher unemployment and it would be very expensive – in Greece, Europe as a whole and even in Germany,” he pointed out.

Meanwhile, Greek Finance Minister Yannis Stournaras has also insisted that Greece must remain in the euro to survive. “We have to stay alive and remain under the umbrella of the euro, because that is the only choice that can protect us from a poverty that we have not experienced,” he said.

Greece faces a tough challenge this week as it tries to convince European authorities they are committed to the reforms in order to ensure a two-year extension of financial aid. Greek FM Dimitris Avramopoulos has met Germany's FM Guido Westerwelle ahead of Friday's meeting in Berlin between their countries' leaders, Chancellor Angela Merkel and Prime Minister Antonis Samaras. French President Francois Hollande is also due to meet Merkel and Samaras this week to discuss the Greek fiscal situation.

However, some German officials have taken a hard line on Greece. Finance Minister Wolfgang Schaeuble said on Saturday: "I have always said that we can help the Greeks, but we cannot responsibly throw money into a bottomless pit." Bavarian State Finance Minister Markus Soeder, has called for Greece to leave the eurozone this year, although his comment was criticized by Westerwelle.

Finland has also ruled out the idea of a third aid package for Greece until reforms are implemented. “There will be no third package [for Greece] if it does not make structural reforms,” Alexander Stubb, Finland's Minister for European Affairs and Foreign Trade, told reporters.

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