Former Bank of England policy maker DeAnne Julius said a Greek exit from the euro area probably wouldn’t mean a financial fallout such as that in the wake of the 2008 collapse of Lehman Brothers Holdings Inc.
“There’s very little risk of a Lehman-type moment” immediately after a Greek exit, Julius said in an interview on Bloomberg Television on Tuesday. “It’s been anticipated as a possibility for a long time. I don’t think the effect would be very large, but certainly the ECB’s current QE program, flooding Europe with liquidity, will help to cushion whatever block or whatever shock or blow there is.”
Julius also said Greece may have missed its chance to hammer out a deal on bailout funds by taking too tough a stance in talks with creditors over reforms demanded in return.
Europe’s most-indebted state has been in a standoff with its lenders for months. German Chancellor Angela Merkel and French President Francois Hollande on Tuesday gave Greece until the end of May to reach a deal on its aid program, urging faster talks to end the standoff.
“I expect the worst,” Julius said. “The negotiations had a chance at the beginning to succeed. Greece is a small country -- it’s certainly feasible in theory. But the very hardline stance that they took early on -- the finance minister especially -- alienated everybody, not just the Germans.”