GREEK EU commissioner Maria Damanaki has raised the prospect of her country being forced out of the euro zone if it does not quickly assert control over its wayward public finances.
Amid a renewed bout of market turmoil as the European authorities squabble over the failing Greek bailout, Ms Damanaki said in a prepared statement that the country’s membership of the single currency is now under threat.
She is the first senior European official to publicly declare that the debt crisis which has roiled the single currency area for more than 18 months could result in a euro member reverting to its old currency.
“The greatest achievement of post-war Greece, the euro and the European course of the country is at risk,” said Ms Damanaki, who has responsibility for the fisheries portfolio in the commission.
“The scenario of Greece being distanced from the euro is now on the table, as are ways to do this. I am obliged to speak openly. We have a historic responsibility to see the dilemma clearly.
“Either we agree with our creditors on a programme of tough sacrifices and results, undertaking our responsibilities to our past or we return to the drachma. Everything else is of secondary importance.”
Ms Damanaki’s intervention indicates that very extreme measures are now under discussion to deal with the Greek crisis.
However, the spokesman for economics commissioner Olli Rehn immediately dismissed the suggestion that Greece might return to the drachma.
“The scenario of Greece leaving the euro has not been and is not on the table in the euro group of ministers,” he said.
Diplomatic sources say there is no legal mechanism for a country to leave the single currency.
While pointing out that the only way to achieve that under current law may be for Greece to leave to EU altogether, the sources acknowledge that the law could be changed.
Until Ms Damanaki’s remarks yesterday, the EU authorities repeatedly denied that the sovereign debt crisis could compromise the integrity of the 17-country currency system.
In Brussels, however, informed sources say increasing frustration with the authorities in Athens over their failure to execute their bailout obligations has led senior officials to examine how Greece could be removed from the euro.
Deep divisions have surfaced between some EU finance ministers and the European Central Bank (ECB) over a contentious plan to seek to extend the maturities on Greek sovereign debt.
The ECB believes it is not possible to distinguish between a “soft re-profiling” of Greek debt or “hard restructuring”, code for full-blown default.
