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Greece Could Exit Euro Within 3 To 4 Months

By: EW News Desk Team Date: 4 January 2012

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04 January 2012

The Greek government is prepared to abandon the euro currency within the next three to four months, unless negotiations for a second 130 billion euro ($169 billion) bailout package can be resolved soon, said a government spokesman on Tuesday.

"The bailout agreement needs to be signed otherwise we will be out of the markets, out of the euro," claimed Pantelis Kapsis in an interview broadcasted on Skai TV. "The situation will be much worse."

"The next three to fourth months are the most crucial and that is the reason this government exists," added Kapsis, as quoted by Reuters.

Greece appeared to have resolved its second bailout package earlier in October last year, when European leaders and the IMF agreed back then to the $169 billion in fresh aid for the debt-stricken country. However, many of the finer details to the second detail remain unsettled, including negotiations with private creditors, such as banks and investment firms, to write down a significant portion of their holdings of Greek debt.

According to Kapsis, further cutbacks and austerity measures, including possible new taxes, might be required to address the revenue shortfall in the country.

"We will see what the shortfall is and it is very likely that measures will be required," said Kapsis, as cited by AP. "I also don't believe it is easy to impose new taxes, but what does cutting spending mean? To close down the public sector?"

"There is no easy solution," he warned.

Public response to more austerity measures though could be less than welcoming. Still, the Greek government is likely to push ahead with these measures in order to secure the second bailout.

In his New Year’s Eve addressed delivered over the weekend, Greek Prime Minister Lucas Papademos stressed the need for Greece to stick to the reforms in order to stay in the euro.

Top Greek officials have also warned over the past few days that a return to the drachma would be "hell" and that the country must stick to austerity to avoid it.

According to Professor Nickolaos Travlos, dean of the ALBA Graduate Business School in Athens, the government’s latest announcement could be a warning shot to its people over the necessity of the austerity measures.

"Not all reforms have been voted on, so the government is trying to give the message that we have to speed up the process. The message is 'people tolerate because the alternative is very serious'," said Travlos, in an interview with the BBC.