In what appeared to be a shot across the bows of the French, meanwhile, Germany's central bank warned for the first time that if the Greek crisis came to a head, Germany's and the eurozone's interests would be best served by Greece's exit from the currency. According to the Reuters news agency, the 17 governments of the eurozone were told on Monday to draw up individual contingency plans for a Greek exit. The Greek government denied that such an instruction was issued, but not before investors, fearful of a disorderly break-up of the euro, led a sell-off on global stock markets. The FTSE 100 fell 136 points, or 2.53%, while the leading indexes in France and Germany saw similar declines The Bundesbank in Frankfurt said that Greece was threatening to renege on the terms of its €130bn (£104bn) euro bailout. "The challenge this would create for the euro area and Germany would be considerable but manageable," the statement said. "By contrast, a significant dilution of existing agreements would damage confidence in all euro area agreements and treaties … calling into question the institutional status quo."....The timing of the Bundesbank warning appeared to be directed at the talks. It said that given the risks involved in bailing out Greece, eurozone governments should reconsider their lifeline to Athens. No decisions were expected. Herman Van Rompuy, who was chairing the summit, said there should be no taboos and appeared to support French pressure for a discussion of eurobonds by calling for a debate on longer-term integration measures in the monetary union. Merkel and Hollande disagree on tactics towards Greece, with the French favouring sending a signal on easing the schedule for Greek deficit reduction while the Germans believe this would encourage Athens to compromise on the austerity measures....Disarray in Europe and fears of an unstoppable Greek exit sent markets into a tailspin. The FTSE 100 lost 2.53pc, and the German DAX dropped 2.3pc. Spain's IBEX slumped 3.3pc to a nine-year low. The euro tumbled almost a cent to $1.2566 against the dollar, the lowest since August 2010. Spain's 10-year bond yields jumped to 6.14pc.
The summit was a polite showdown between Germany and an emerging "Latin Bloc" led by France, Italy and Spain, determined to force a change in the Europe's strategic direction. The Latin coalition wants eurobonds to kickstart growth and mutualise debts, anathema to Germany, as well as EMU-wide deposit guarantees and an activist ECB. Chancellor Angela Merkel has ruled out eurobonds, although there could still be room for project bonds or short-term "euro-bills".
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Spanish leader Mariano Rajoy warned that spiralling borrowing costs were pushing his country towards the brink. "Europe has to come up with an answer because we can't go on like this for long," he said. Mr Rajoy said austerity efforts were being overwhelmed by the force of the crisis, blaming the ECB for failure to contain contagion by capping yields
Fitch Ratings said the sums needed to keep Greece on track at this stage were "pretty small" compared with the sunk costs of past rescues. "The Greeks have not run out of bargaining power," it said.
David Riley, Fitch's managing-director, said it would downgrade all eurozone states if Greece left. Europe's policymakers would have to conjure a new regime for Euroland, and a quantum leap to fiscal union to restore credibility. "They couldn't simply shrug it off," he said.
The break-up of the Franco-German axis is a historic opportunity for the UK. The Euro is not worth wrecking Germany's financial stability for, still less ours.
The UK should support Germany in refusing to fund endless bail-outs for Southern Europe - and be ready, after the Euro has folded, to push for a less political, more economically-effective Europe that builds on German and British standards of governance.
Greece will get over leaving the Euro. It will not be nearly as bad as vested interests are making out. They will recover, devalue, and export their way back to growth. It is frankly the only option that allows them to keep their pride and hope for the future.
Here's my bet: Within 6 months after going back to a devalued drachma, Greece starts to experience the strongest economic growth in the EU. The citizens of Spain and Italy take notice and start beating the doors for an exit.
..4 euros for a pint and crap service, plus a toilet (in your nice restaurant)with a bin full of toilet paper to add to the ambiance of a democracy that probably had better sanitation 2000 years ago, and maybe some anarchist trying to burn you out of your hotel because he thinks your German; so perhaps time to think again. Turkey? Same crappy toilets (yeh, I know but I had to write it), but better service, cheaper and nicer...Turkey`s currency?It isn`t that piece of crap paper with Frau Merkel`s head on it (coming soon) is it?
"“Greek banks are solvent and, like all eurozone banks, have a guaranteed solvency by the European Central Bank."
"...usually the pre and post election periods are characterised by tranquillity, hence the chances of strikes in Greece for summer 2012 are far lower than in most other European countries"
Based on the above -which I consider to be outrageous lies - the Greek Tourist Organisation must be staffed by re-cycled polticians
@pm
"A cheap holiday in other people's misery"
Greece is a third-world country and should only be asking third-world prices: they have screwed themselves by believing the nonsense politicians have told them about how good they are and how they deserve to have everything that properly industrialised ( and properly tax-paying ) nations have,.
There is no way EU is going to let Greece out. This is only a strategy to force Greeks to vote for a specific party in the coming elections on 17 June. It is a shame such dirty games are played by the political leaders of a whole continent.
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