Central Banks

Thursday, November 3, 2011 - 10:45

ECB Draghi: EU Treaty Does Not Permit Greece Eurozone Exit

FRANKFURT (MNI) - As the leaders of the EU's two biggest economies discuss the prospect of a Eurozone without Greece, the new President of the European Central Bank, Mario Draghi, reiterated Thursday that the EU's treaty does not permit Eurozone countries to abandon the common currency.

The possibility for Greece to abandon the euro is simply "not in the treaty," Draghi said at his first press conference as president of the ECB.

"I wouldn't call my answer legalistic," Draghi added later. "There is very little that we have other than the treaty. We have to have a full respect for the spirit and the letter of the treaty, especially on an issue like the breakup of the Eurozone which is not a marginal one."

The political situation in Greece is "very fast evolving" and the ECB will be "closely monitoring the situation", he said.

Greek Prime Minister Papandreou's decision earlier this week to call a referendum on reforms seen as vital to holding up his country's end of the bargain in a new rescue deal struck by Eurozone leaders and international financial institutions last week has thrown the deal's prospects into question and led to calls from the leaders of France and Germany to withhold future aid until the country's commitment to its obligations has been confirmed.

Last night the idea of the referendum changed to one that would ask Greeks to say whether they wanted to stay in the Eurozone. Senior European officials, including Eurogroup Chairman Jean-Claude Juncker, French President Nicolas Sarkozy and German Chancellor Angela Merkel have all said within the recent 24 hours that they could imagine a Eurozone without Greece.

However, the political situation in Greece is rapidly evolving. Papandreou now appears to be headed into talks with opposition parties for a coalition government, and a government spokesman in Athens said moments ago that the prime minister was now considering cancelling the referendum.

Sarkozy and Merkel will discuss the issue along with other leaders of the world's major economies at the G-20 summit in Cannes Thursday and Friday.

--Brussels bureau: +324-9522-8374; pkoh@marketnews.com

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