Throw the Greeks out of the eurozone

That’s what Philipp Rösler, the leader of the junior partner in Germany’s coalition government, is saying.

Now in a recent post on Italy I wrote near the end that:

Angela Merkel, admitting that leaving the euro zone is politically and legally possible during her commentary addressing the Greek referendum in Cannes, has already broken the taboo. Now everyone knows that it is possible to default, leave the euro zone and re-gain competitiveness in a move to a devalued currency.

Merkel was diplomatic in breaking the eurozone exit taboo because she was saying it is Greece’s choice. Rösler is saying ‘throw the Greeks out of the eurozone.’

FDP leader and German Economics Minister Philipp Rösler doesn’t rule out a withdrawal by Greece from the euro zone. "The Greeks themselves have the choice: reform within the euro area or no reform outside of it. There are no other choices, "Rösler told "Bild".

So, Rösler is saying that Germany calls the shots and that the Germans want reform. Further, he means to say that if the Greeks don’t do what Germany demands, they will be kicked out of the euro club.

"The Greek government must understand that our patience will come to an end”

In another German newspaper, the Frankfurter Allgemeine Zeitung, Barry Eichengreen says that this kind of talk is counterproductive:

FAZ: According to Angela Merkel, the EU is "prepared" for Greece’s euro exit . That sounds more like goodbye.

Eichengreen: I hope not. Greece’s withdrawal from the euro is something for which one cannot fully prepare. The consequences would be enormous destructive potential. Mrs. Merkel should watch what she says.

Why so destructive?

Let me say this: Mrs. Merkel should remember September of 1992. At that time, the Bundesbank President Helmut Schlesinger created chaos with a thoughtless remark about the lira which almost led to the collapse of the European Monetary System.

At the time Schlesinger said a devaluation of the Italian lira would not solve all the problems of the monetary system. Everyone thought about the British pound – and its price crashed. What does this have to do with the euro?

In times of crisis, one should weigh one’s words carefully. At a minimum, Mrs. Merkel’s comments are no cause for hope.


There has been a change in rhetoric. The euro countries are no longer saying: The monetary union is forever and we will do everything to make it work.

But what’s done is done. The taboo is broken. Merkel and Rösler have ripped the band aid off. Now everyone knows that a eurozone exit is possible. Therefore, it is going to happen.


  1. Dave Holden says

    I note they didn’t say explicitly Greece will be kicked out of the Euro because there is no legal way for that to happen.

    1. David Lazarus says

      They may have simply opened Pandoras Box and the markets will work out the end results. Overall the problem is excessive debt. The pricing mechanism has been distorted to the point no one trusts it and that debts are problematic. There simply needs to be write-down of this debt if it is not sustainable. Banks need to take their losses. Any attempts to maintain the status quo is just delaying the eventual outcome. That outcome is as we probably suspect is financial collapse. It is better to do an organised collapse like the FDIC on Friday night. So that the markets have the weekend to think this over. Otherwise this just becomes a case of unplanned collapse and if that happened during the week it will only mean markets overreact.

Comments are closed.

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More