The Greek debt crisis has once again prompted European Union leaders to urge Greece to stay on course and complete the reforms demanded under its bank bailout program. The country is wavering in a decision to quit the single currency.
After nearly six hours of talks held during an informal dinner, leaders said they were committed to Greece remaining in the euro zone, but it had to stick to its side of the bargain too, a commitment that will mean a heavy cost for Greeks.
“We want Greece to stay in the euro, but we insist that Greece sticks to commitments that it has agreed to,” German Chancellor Angela Merkel told reporters after a Wednesday evening summit in Brussels dragged long into the night.
Three officials told Reuters the instruction to have plans in place for a Greek exit was agreed-on Monday during a teleconference of the Eurogroup Working Group (EWG).
However, the Greek finance ministry denied there was any such agreement but Belgian Finance Minister Steven Vanackere, said: “All the contingency plans (for Greece) come back to the same thing: to be responsible as a government is to foresee even what you hope to avoid.”
Two other senior EU officials confirmed the call and its contents, saying contingency planning was only sensible.
In its monthly report, Germany’s Bundesbank said the situation in Greece was “extremely worrying” and it was jeopardizing any further financial aid by threatening not to implement reforms agreed as part of its two bailouts.
It said a euro exit would pose “considerable but manageable” challenges for its European partners, raising pressure on Athens to stick with its painful economic reforms.
Greek officials have said that without outside funds, the country will run out of money within two months and there remains the threat that if it crashes out of the euro zone, other member states could be brought down too.
A document seen by Reuters detailed the potential costs to individual member states of a Greek exit and said that if it came about, an “amiable divorce” should be sought with the EU and IMF possibly giving up to 50 billion euros to ease its path.
The social unrest continues, but Greece could see problems if it returned to its old currency. Because the country imports much of its food and medicine, it would likely face severe shortages as it finds itself struggling to pay for goods with a devalued currency.