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Talk of Greece eurozone exit strategy rears its head

07 February 2012, 23:51 CET
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(BRUSSELS) - The head of the European Union executive was forced Tuesday to try and quell mounting suggestions that it might be cheaper and easier for the eurozone to cut Greece adrift.

A Greek exit from the eurozone now would be less risky than if it had happened in early-2010 when the scale of its debt crisis first became apparent, Dutch Prime Minister Mark Rutte told Netherlands public radio as bailout talks in Athens went to the wire.

"There is less risk now," Rutte told an increasingly eurosceptic Dutch audience.

"It is in our interest that Greece remain -- and to achieve that it must do all it has promised to do... but if that does not work out, then we are stronger now than a year and a half ago," he added.

Rutte was expressing sympathy for the view put forward by a senior European Commissioner, Dutchwoman Neelie Kroes.

She told a Dutch newspaper she was not in favour of Athens going back to the drachma, but said a Greek departure from the monetary union would not be a disaster.

"It is not a train crash if someone leaves the eurozone," the EU commissioner for the digital economy told De Volkskrant newspaper.

Greece's EU fisheries commissioner Maria Damanaki had already told Greek newspaper To Vima that fallback "planning" for a Greece exit was under way at eurozone level.

Dutch Finance Minister Jan Kees De Jager has also outlined on radio the argument, backed by independent analysts, that eurozone countries can now ring-fence their currency zone.

The line goes that governments, aided by the IMF pledges of support, have done enough through reinforcing fiscal discipline and the creation of financial firewalls to stop borrowing costs rising off the scale.

This has been borne out by a succession of successful debt auctions in recent weeks for Italy and Spain, the big worries should contagion from Greece seep across borders once more.

"This is a big, big change on a year ago," the head of the European Policy Centre, Hans Martens, recently told AFP.

"Even Greece leaving the eurozone ultimately now seems to be factored in as a bearable scenario.

"Greece leaving the eurozone now -- that wouldn't destroy anything, although I still don't think it will even come to that," he said.

In Paris on Monday for talks with French President Nicolas Sarkozy, German Chancellor Angela Merkel ramped up the pressure on Athens, warning that Greece would receive no more EU aid until Athens reaches a deal with the EU, European Central Bank (ECB) and IMF on more spending cuts and reforms.

Sarkozy and Merkel publicly broached the idea of a Greek exit in November, suggesting a public rejection of bailout terms would be tantamount to rejecting the euro, and that the single currency would continue without Greece.

Behind the scenes over recent weeks, senior governmental officials have repeatedly told AFP of a change in the mood during finance ministerial meetings leading to a willingness to contemplate at least threatening an exit for Greece, as exasperation at broken Athens promises took hold.

However, Kroes' remarks prompted a sharp response from her boss, European Commission president Jose Manuel Barroso.

"We want Greece in the euro," Barroso said, warning that "the cost of a Greek exit from the eurozone would be higher than the cost of continuing to support Greece."

Angered at salary and pension cuts being imposed on their country, Greek protesters burned a German flag earlier on Tuesday as Prime Minister Lucas Papademos pushed ahead of a make or break talks on a bailout.

With the country in the grips of a general strike, scuffles broke out on Syntagma Square in central Athens before riot police waded in.

The country is rapidly running out of time to agree new budget action and to conclude a debt write-off with banks needed to secure a second rescue package and avoid default in about six weeks' time.

Greece must pay back 14.5 billion euros in bonds due March 20.

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