Top finance officials of the euro zone’s biggest economies met to discuss Greece’s debt crisis on Friday and Athens denied a media report that it was considering whether to leave the bloc.
Jean-Claude Juncker, head of the group of euro zone finance ministers, said the meeting in Luxembourg was attended by ministers from Germany, France, Italy and Spain. He said there was a broad discussion of Greece and other international economic issues.
Juncker denied a report in Germany’s Spiegel Online magazine that the talks were held to discuss the possibility, raised by Athens, of Greece withdrawing from the 17-member euro zone, as well as the idea of restructuring Greece’s 327 billion euro (287 billion pounds) sovereign debt.
“We have not been discussing the exit of Greece from the euro area. This is a stupid idea. It is in no way — it is an avenue we would never take,” he told reporters.
“We don’t want to have the euro area exploding without reason. We were excluding the restructuring option, which is discussed heavily in certain quarters of the financial markets…”
But Juncker said a meeting of all euro zone finance ministers on May 16 would discuss whether Greece needed a further economic plan, beyond the 110 billion euro bailout which it obtained from the European Union and the International Monetary Fund in May last year. He did not elaborate.
Greek Finance Minister George Papaconstantinou attended the Luxembourg talks, his finance ministry said. It added that Greece remained committed to repairing its finances and returning to economic growth.
“The minister was invited to exchange views (on issues including) economic developments in Greece,” the ministry said. “It is clear that during this meeting it was never discussed or posed as an issue whether Greece would remain in the euro zone.”
The Luxembourg talks were also attended by European Central Bank President Jean-Claude Trichet and Olli Rehn, the European commissioner for economic and monetary affairs, Juncker said.
Earlier in the day, the euro fell nearly 1 percent against the dollar and the cost of insuring Greek debt against default was quoted at a record high in response to the Spiegel report.
“The government has raised the possibility of leaving the euro zone and reintroducing its own currency,” Spiegel said without citing its sources.
Despite its international bailout Greece, which joined the euro zone in 2001, has been unable to cut its budget deficit as fast as planned amid a deep recession. It has been raising taxes and slashing spending but is still plagued by tax evasion, corruption and the economy’s lack of competitiveness.
Financial markets have been speculating for months that Athens will eventually have to restructure its debt and with the political will for more austerity starting to flag, some Greek politicians have been suggesting a “soft” restructuring which might involve lengthening maturities on the country’s bonds.
An exit from the euro zone could help the economy in the long term; Greece would be able to cut interest rates and having its own, weak currency would boost exports and tourism.
But there is no legal procedure for leaving the zone, and the risks and immediate costs of the process — Greece could face bank runs, and banks around the region could be damaged — mean the government is likely to fight hard to avoid that option.
Although taxpayers in rich euro zone states such as Germany are becoming increasingly reluctant to fund weak euro zone states, their governments prize the currency union as one of Europe’s great political achievements. The EU is currently negotiating a bailout with Portugal, the third state it is rescuing after Greece and Ireland.
A German government official told Reuters on Friday that a Greek exit from the euro zone “is not planned and was not planned,” while a spokesman for the Austrian finance ministry said a breakup of the bloc would be “absolutely unthinkable.”
Spiegel quoted from what it said was an internal German finance ministry paper that German Finance Minister Wolfgang Schaeuble was taking with him to Luxembourg, which warned that a Greek exit “would lead to a significant depreciation of the domestic currency versus the euro” and increase Greece’s debt levels to 200 percent of gross domestic product. Its debt is officially projected to climb to 153 percent of GDP this year.