Tuesday, January 6, 2015

Germany, France take calculated risk with Grexit talk

January 6, 2015

Evoking a possible Greek exit from the euro zone, Germany and France are taking a coordinated and calculated risk in the hope of averting a leftist victory in Greece's general election on Jan. 25.

The intention, according to Michael Huether, head of Germany's IW economic institute, is to make clear that other euro area countries "can get on well without Greece, but Greece cannot get on without Europe", and to warn that the left-wing Syriza party would bring disaster on the country.

Syriza leader Alexis Tsipras, whose party leads in opinion polls, insists he wants to keep Greece in the euro. However, he has promised to end austerity imposed by foreign creditors under the country's bailout deal if he wins power, and wants part of the 240 billion euros lent by the EU and IMF written off.

The risk is that the European Union's two main powers are seen by Greeks as interfering and threatening them, provoking a backlash after a six-year recession that shrunk their economy by 20 percent and put one in four workers out of a job.


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