Europe 'will lose €1 trillion if Greece goes under'

A woman holds the flag of Greece at the Greek solidarity festival in Trafalgar Square, London, Britain, on July 4, 2015.
A woman holds the flag of Greece at the Greek solidarity festival in Trafalgar Square, London, Britain, on July 4, 2015. PHOTO: REUTERS

Greek Finance Minister accuses creditors of 'terrorising' his people into accepting austerity

ATHENS • Europe will lose €1 trillion (S$1.5 trillion) if it allows Greece to go under, the country's finance minister said yesterday, accusing creditors of "terrorising" Greeks into accepting austerity in a referendum on bailout terms.

After a week in which Greece defaulted, closed its banks and began rationing cash, Greeks vote today on whether to accept or reject tough conditions sought by international creditors to extend a lending lifeline keeping the country afloat. Their decision could determine Greece's future as a member of the single currency.

Addressing a crowd of over 50,000 in central Athens, left- wing Prime Minister Alexis Tsipras urged them to spurn the deal, rejecting warnings from Greece's European partners that this may bring an exit from the euro zone and even greater hardship.

A slew of opinion polls gave the "yes" camp, which favours accepting the bailout terms, a slender lead but all were within the margin of error and pollsters said the vote was too close to call.

Finance Minister Yanis Varoufakis said there was too much at stake for Europe to cast Greece adrift. "As much for Greece as for Europe, I'm sure," Mr Varoufakis told the Spanish newspaper El Mundo. "If Greece crashes, €1 trillion (the equivalent of Spain's gross domestic product) will be lost. It's too much money and I don't believe Europe could allow it."

He added: "What they're doing with Greece has a name: terrorism. Why have they forced us to close the banks? To frighten people. And when it's about spreading terror, that is known as terrorism."

Athens' 18 partners in the euro zone say they can easily absorb the fallout from losing Greece, which accounts for barely 2 per cent of the bloc's economic output. But it would represent a massive blow to the prestige of Europe's grand project to bind its nations into a union they said was unbreakable.

Capital controls imposed by the government last week have driven home for many Greeks the catastrophe they face if the nation exits the euro zone and is forced to turn to a new, heavily devalued currency.

Ms Louka Katseli, chairman of the National Bank of Greece, said that without a fresh injection from the European Central Bank or lowering the ceiling on withdrawals from €60 now, ATMs will start running dry within hours of today's vote.

Finance Minister Wolfgang Schaeuble of Germany, which is Greece's biggest creditor and toughest critic, appeared to suggest that Greece may be left without the euro currency "temporarily".

"Greece is a member of the euro zone. There's no doubt about that. Whether with the euro or temporarily without it, only the Greeks can answer this question. And it is clear that we will not leave the people in the lurch," he told the Bild newspaper.

REUTERS, BLOOMBERG

A version of this article appeared in the print edition of The Sunday Times on July 05, 2015, with the headline 'Europe 'will lose €1 trillion if Greece goes under''. Print Edition | Subscribe