June 18 (Bloomberg) -- Greece’s election outcome is a “sideshow” as the battle to prevent a breakup of the euro zone shifts to Spain, said Mario Blejer, a former Bank of England adviser who took the reins of Argentina’s central bank after its 2001 default.
“If the system can’t protect one of the most important countries then it really can’t be sustained,” Blejer, 64, said during an interview yesterday in Los Cabos, Mexico, ahead of a summit of leaders from the Group of 20 richest nations.
Financial markets will probably welcome the victory of the pro-bailout New Democracy party in yesterday’s Greek parliamentary vote as “the least bad result” that avoids any “immediate clash” between the debt-saddled nation and its creditors, Blejer said. Still, the government that takes office will lack “legitimacy” and will soon need to reopen the terms of the bailout to build political support for its pledge of austerity.
“You can’t put forward all of these measures, which are very unpopular, with a majority of five people,” said Blejer.
Greece’s largest pro-bailout parties, New Democracy and Pasok, won enough seats to forge a parliamentary majority, official projections showed, easing concern the country was headed toward an imminent exit from the euro. The currency rose on the result.
Saving the Euro
Blejer took control of Argentina’s central bank for five months in January 2002, when the country was reeling from the effects of what was then the biggest sovereign default in history and the loss of four presidents in just over two weeks.
To save the euro region in its current form, Germany and northern European nations must agree to restructure the debt loads of poorer members like Greece, Portugal and Spain, he said.
“If they don’t agree to transfer resources, the euro has no future,” Blejer said, adding that continued reliance on “half-solutions” could provoke a bank run in Greece and other countries at any moment.
“I don’t know any model that can predict when a bank run is going to start,” said Blejer, who saw deposit levels plunge during Argentina’s financial crisis. “If the Greeks had an Argentine mentality, then they would’ve already taken all the money out of the bank.”
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