Orderly Greek exit: Available options
By Gaspard Sebag | Wednesday 23 May 2012
The European Commission has been trying to appear as if it were not even considering Greece dropping out of the eurozone. Trade Commissioner Karel De Gucht fudged that when he told the Belgian newspaper
De Standaardthat the EU executive and the European Central Bank were working on contingency plans in case of an exit from the single currency. What are therefore the options for an “orderly” exit, which International Monetary Fund chief Christine Lagarde said is a scenario that needs to be technically considered?
Europolitics weighs options.
In order to quell fantasies about Greece leaving the euro, the Commission and the European Council insist that the treaties do not foresee such a possibility. The only option, they say, is to leave the EU and no one wants that, least of all the Greeks themselves. Since the entry into force of the Lisbon Treaty, in December 2009, “Any member state may decide to withdraw from the Union in accordance with its own constitutional requirements” (Article 50 of the Treaty on the European Union). If Athens were so inclined, it could therefore exit the EU and subsequently apply for membership with an opt-out of the single currency.
Easier said than done. Alain Lamassoure (EPP, France), who took part in the European Convention, predicts that if Greece were to go down such an avenue, it would take years. To begin with, while the request to exit is unilateral, the agreement setting out its arrangements has to be negotiated with the EU. Once that is done, Athens, as any other wannabe member state, would have to meet the accession criteria. Marianne Dony, president of the Institute for European Studies at the Université Libre de Bruxelles (IEE-ULB) and a specialist in EU law, has doubts as to whether Greece would be up to scratch to meet the Union’s stringent criteria.
Dony suggests therefore another option, not explicitly foreseen in the treaties but available nonetheless: drawing up a protocol to extricate Greece out of the eurozone without it leaving the Union. Though probably faster than a round trip outside the EU, the major downside of this option is that it requires the approval of all member state parliaments. In light of this, Richard Corbett, a member of the cabinet of European Council President Herman Van Rompuy, blasts this proposal as having no grounding in reality. “In a situation of exit within the next few days or weeks, which remains unlikely and nobody is working toward that solution, how on earth would you have the time to negotiate, approve and then ratify a protocol in 27 national parliaments in time for it to be of any use whatsoever?” he asks.
In any case, an orderly exit from the eurozone, using either of these two avenues, requires Athens making a request to that effect. From a legal point of view, Greece cannot be pushed out of the single currency. “It’s impossible,” explains Dony, who is shocked by the fact that some politicians suggest Athens could be ousted from the euro. “If we want to end up with an anti-European majority at the June [parliamentary] elections [in Greece] let’s keep it up that way, let’s keep on saying that we will decide for them,” she warns. Lamassoure also expresses his anger at EU leaders who suggest cutting the “infected limb to protect the rest of the body” and other “stupid” threats in a similar vein. “In my mind, from the start, ie in the past two years, it has been a political and economic mistake in analysis from our top leaders to suggest that a country can leave the eurozone,” he says.
While the Greek elections will probably turn into a referendum on the EU, neither Corbett nor Dony or Lamassoure believe for an instant that it could be in Athens’ interest to leave the euro. “For a start if Greece were to have a new currency of its own it would be devalued by a huge percent against the euro, not only are debts denominated in euro, all kinds of contracts and other things are denominated in euro so they would all of a sudden be increasing the cost in terms of their currency of all these things, including all their energy imports,” says Van Rompuy’s advisor. Naturally, contagion to other countries is another consideration to take into account. “If we march Greece out of the eurozone
manu militari, are we not going to encourage voluntary attacks against the other weak links to isolate them and exclude them?” muses Dony in reference to Spain and Portugal.
Lamassoure believes that “switching currency is not the solution to the Greek problem”. “The answer to the Greek problem is to stop living scandalously beyond its means and to stop paying people to do nothing,” he adds in reference to the prevailing clientelism in the Southern state’s public administration as well as its private sector. The French MEP considers that the political class throughout Europe and in Greece must “attempt to put the Greek people in front of their responsibilities not by threatening to chuck them out of the euro - we cannot do it, it makes no sense – but simply by saying ‘you don’t agree with the [EU-IMF] recovery plan put in place with your leaders, fine, then we’ll stop the assistance’”.
This could also have disastrous consequences. Indeed, while forcing Greece out of the single currency is impossible from a legal point of view, Andrew Duff (ALDE, UK), also a member of the European Convention, suggests, without wishing such an outcome, that Athens could well “fall out of the euro”. He paints a dark scenario: “If there’s no government which can be formed, which can apply and respect the conditions placed on Greece by the IMF and the EU, then there will be no money and then you can no longer pay your army and civil servants and people begin to queue around the block [to get their money out of the banks].” If this were to happen, Duff predicts that it would take place “in a matter of minutes, not hours” and “over a long weekend” when the financial markets are closed. “If there’s a jour ferié that helps,” he says.
Drawing a parallel between the situation in the United States and in the EU, Corbett tries to nuance the scare-talk: “California is in a state of bankruptcy from time to time or near to it and pulls back from the brink of it, nobody suggests that that might cause California to drop out of the dollar zone”.