Greek exit from the eurozone realisable ‘but not preferable’

A Greek exit from the eurozone would be manageable, European Central Bank policymaker Joerg Asmussen was quoted as saying yesterday, although he would prefer if the crisis-stricken country remained within the single currency bloc.

He also said that the Bundesbank, whose chief ECB president Mario Draghi singled out earlier this month for expressing reservations over the bank’s new bond-buying plans, was not isolated in Europe.

The comments on Greece from the ECB executive board member, Germany’s deputy finance minister until he took the post at the end of last year, sum up a growing debate in Berlin on the possibility of cutting Greece free.

Most would prefer not to but an increasing number of MPs and influential figures have come out of the woodwork saying the eurozone is strong enough to deal with the fallout.

“Firstly, my clear preference is that Greece should remain in the currency union,” Mr Asmussen was quoted as saying in an interview in Germany’s Frankfurter Rundschau.

“Secondly, it is in Greece‘s hands to ensure that. Thirdly, a Greek exit would be manageable.”

But Mr Asmussen also warned that a so-called Grexit would not be as orderly as some imagined: “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 also said it would be good if the eurozone’s permanent bailout mechanism, the European Stability Mechanism, successor to the European Financial Stability Facility, were up and running as soon as possible.

“The ESM is a better instrument for dealing with the crisis than the EFSF,” he was quoted as saying.

Germany’s Constitutional Court has said it will deliver its ruling on whether the ESM and the fiscal pact are compatible with the German constitution on September 12. Germany cannot legally ratify the two treaties without the go-ahead from the court and the ESM cannot come into effect without German backing.