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Former Greek Leader Sees Euro Exit as ‘Catastrophe’

Former Greece's Prime Minister Costas Simitis
Costas Simitis, former Greece's prime minister. Photographer:Costa Anastasakis/Bloomberg

Greece must be part of the euro area and it would be a “catastrophe” for the nation to revert to its own currency, a move that threatens a run on banks, former Greek Prime Minister Costas Simitis said.

“There’s no question we must belong to the euro zone,” Simitis, who led Greece when it joined the euro in 2001, said at a forum in Beijing today. “The idea of coming back to the drachma is an idea that cannot function.”

Luxembourg Prime Minister Jean-Claude Juncker said yesterday that talk of Greece leaving the euro was “nonsense” and “propaganda” as the nation’s political impasse since its inconclusive May 6 election looked set to continue for a second week. President Karolos Papoulias failed to secure agreement on a unity government and avert new elections with the country heading toward a possible exit from the euro area.

A Greek withdrawal from the euro could be “technically” managed yet would damage confidence in the monetary union, Patrick Honohan, a member of the European Central Bank Governing Council, said on May 12. “It is not necessarily fatal, but it is not attractive.”

A retreat from Europe’s economic and monetary union is a “discussion without sense,” Simitis, 75, said at a forum co-hosted by the Greek Embassy in Beijing on the European debt crisis and its influence on China-EU cooperation.

‘Bank Run’

An exit would require banks to close for at least three months while preparations, including printing a new currency, are made, Simitis said, citing the views of “experts.”

“Having the banks close for three months -- that’s nonsense,” he said. “If they close more than three days there will be a bank run.”

The once-taboo issue of a Greek departure or expulsion from the 17-nation currency union burst into public debate last week, when ECB officials including Honohan of Ireland aired the pros and cons.

Simitis said he believes Greece will never leave the euro and that its political parties are in a “certain sense” trying to “renegotiate the conditions with the European Union.”

For now Europe is saying “’no’ but after a time, as it usually happens, says ‘all right,”’ Simitis said.

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