Europe is at a “make-or-break point” and the lack of coherence in its economic and political structures are a greater concern for investors than the crisis in Greece, the nation’s former premier George Papandreou said.
With voters going to the polls in the southern European nation today, Papandreou told British Broadcasting Corp.’s “Marr” program that Europe needs a banking union and more integrated fiscal policy.
“The market is telling Europe, not Greece: we are not confident today in the European structures as they are in the euro zone,” Papandreou said. “We are in a make-or-break point in Europe. Greece has its problems, and we take on our responsibility for our problems and our own mistakes, for our past, for our bad governance and that is what we are trying to change. However, the structures in Europe need to be modernized.”
European leaders are set to turn their attention to safeguarding the euro as the vote in Greece today threatens to fuel even more disarray. With investors and policy makers clamoring for clarity amid what Bank of England Governor Mervyn King called a “black cloud” over the world economy, Europe’s chiefs are preparing for their fourth make-or-break summit in a year when they meet in Brussels on June 28.
“Greece is only a precedent of the deeper problems that Europe is facing and particularly the euro zone,” Papandreou said.
Today’s Greek elections carry the latest threat of stoking the turmoil, as polls show the anti-bailout Syriza party running neck-and-neck with New Democracy, which says a vote for Syriza risks a Greek euro exit. Polls also suggest no clear majority, bringing the prospect of further political gridlock.
The election is taking place a week after Spain said it would seek a 100 billion-euro ($126 billion) rescue for its banks, prompting concern Italy would be next to succumb.
Papandreou today said abandoning the single currency would bring ruin for Greece, triggering bank runs, surging inflation and a 20 percent drop in economic output. Sticking with the current bailout is the best hope for the country, he said, even if terms have to be softened.
“It is still a program which is manageable if we stay in the euro,” Papandreou said. Abandoning the currency and the rescue package “would be a major catastrophe.”