Europe thinks the unthinkable on Greece

Fri May 18, 2012 4:28pm EDT
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By Sebastian Moffett and Mike Peacock

BRUSSELS/LONDON (Reuters) - European officials are working on contingency plans in case Greece bombs out of the euro zone, the EU's trade commissioner said on Friday, as European share prices tumbled and Germany warned of continuing financial turmoil.

German Finance Minister Wolfgang Schaeuble, one of Greece's harsher critics, said market unrest fuelled by the euro zone debt crisis could last another year or two. "Regarding the crisis of confidence in the euro ... in 12 to 24 months we will see a calming of the financial markets," he said.

Germany seemed to be increasing pressure on Athens when Greece's government spokesman said that Chancellor Angela Merkel raised the idea of Greece holding a referendum on its eurozone membership -- something Berlin promptly denied.

European shares hit their lowest level since December, depressed by the prospect of a Greek euro exit spreading a wave of contagion in the currency bloc which could engulf much larger economies such as Spain's.

Policymakers insist they want Greece to remain in the euro zone but European Union trade commissioner Karel De Gucht said the European Commission and the European Central Bank were working on scenarios in case it has to leave.

"A year and a half ago there maybe was a risk of a domino effect," De Gucht told Belgium's Dutch-language newspaper De Standaard.

"But today there are in the European Central Bank, as well as in the Commission, services working on emergency scenarios if Greece shouldn't make it. A Greek exit does not mean the end of the euro, as some claim."

Speculation about such planning has been rife, but de Gucht's comments, which were confirmed by a person close to him, appeared to be the first time an EU official has acknowledged the existence of contingencies being drawn up.   Continued...

Two men withdraw money from an ATM in central Athens May 16, 2012. REUTERS/Yannis Behrakis