Trump
envoy says Greece is now more likely to leave the euro
Ted
Malloch, proposed US ambassador to the EU, casts doubt on survival of
eurozone and says Athens should return to drachma
Helena Smith in
Greece
Wednesday 8 February
2017 15.10 GMT
Donald J. Trump ✔
@realDonaldTrump
“Greece should get
out of the euro & go back to their own currency--they are just
wasting time.”
Donald Trump’s
administration has put itself on a fresh collision course with the
European Union after the president’s candidate to be ambassador in
Brussels said Greece should leave the euro and predicted the single
currency would not survive more than 18 months in its present form.
Days after being
accused of “outrageous malevolence” towards the EU for publicly
declaring that it “needs a little taming”, Ted Malloch courted
fresh controversy by saying Greece should have left the eurozone four
years ago when it would have been “easier and simpler”.
Malloch made his
comments as financial markets began to take fright at the possibility
of a fresh Greek debt crisis later this year. Shares fell and
interest rates on Greek debt rose after it emerged that the EU was at
loggerheads with the International Monetary Fund (IMF) over whether
to give the country more generous debt relief.
“Whether the
eurozone survives I think is very much a question that is on the
agenda,” he told Greek Skai TV’s late-night chat show Istories.
“We have had the exit of the UK, there are elections in other
European countries, so I think it is something that will be
determined over the course of the next year, year and a half.
“Why is Greece
again on the brink? It seems like a deja vu. Will it ever end? I
think this time I would have to say that the odds are higher that
Greece itself will break out of the euro,” Malloch said.
The stridently
Brexit-supporting businessman, who has yet to be confirmed as the US
president’s EU ambassador and is seen by Brussels as a provocative
nominee for the post, said he wholeheartedly agreed with Trump’s
tweet from 2012 saying Greece should return to the drachma, its
former currency.
“I personally
think [Trump] was right. I would also say that this probably should
have been instigated four years ago, and probably it would have been
easier or simpler to do,” Malloch said in the interview with the
show’s chief anchor, Alexis Papahelas.
Seven years of
arduous austerity – the price of the international bailout – had
been so bad for the country that it was questionable whether what
came next could possibly be worse, Malloch said.
In the third bailout
in as many years, Greece has lost more than 25% of its GDP due to
austerity-fuelled recession, the biggest slump of any advanced
western economy in modern times. Without further emergency funding
from its €86bn (£74bn) rescue programme, Athens could face a
default in July when debt repayments of about €7bn to the European
Central Bank mature.
Concerns on Tuesday
over Greece’s debts drove up yields on two-year government bonds to
their highest level since last June, reflecting growing anxiety on
financial markets over Athens’s ability to keep up to date with
debt repayments.
The renewed focus
came as the IMF revealed its board was split over how far spending
cuts in the country should go, raising fresh doubts over the IMF’s
participation in rescue plans for the struggling Greek economy. The
IMF believes that the budgetary demands being imposed on Greece by
Europe are unreasonable and that the country’s debts will hit 275%
of national income by 2060 without fresh assistance.
Malloch said: “I
have travelled to Greece, met lots of Greek people, I have academic
friends in Greece and they say that these austerity plans are really
deeply hurting the Greek people, and that the situation is simply
unsustainable. So you might have to ask the question if what comes
next could possibly be worse than what’s happening now.”
The biggest unknown
was not a euro exit, but the chaos it would likely engender as Greece
moved to a new currency, he said.
The governance
structure of the IMF means the US could block any deal it did not
support.
“If the [IMF] will
not participate in a new bailout that does not include substantial
debt relief, and that’s what they are saying, then that, more or
less, ensures a collision course with eurozone creditors,” Malloch
added, saying it was imperative that EU member states forgave a
substantial part of Greece’s mountainous public debt.
“Now we all know
that primarily [puts pressure on] Germany, which remains opposed to
any such actions, so I think it suggests that Greece might have to
sever ties and do Grexit and exit the euro,” he said.
Under bailout
programmes financed mostly by Germany, Greece has been given about
€336bn in rescue loans, money that Berlin and other lenders are
determined to get back. The euro-denominated debt pile would be
essentially erased if Greece reverted to the drachma.
Malloch’s latest
intervention is unlikely to be greeted enthusiastically by EU
officials, who are voicing fears that stalled bailout negotiations
with creditors could pave the way for an accidental default in the
summer.
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