Brussels, 28/06/2015 (Agence Europe) - Nicolas Véron, a French economist from the Bruegel think tank, does not believe there will be an immediate domino effect from the current crisis, but Greece leaving the eurozone would be a real political failure and would lead in the long-term to a weakened European project (interview by Mathieu Bion)
Agence Europe: What's going to happen in Greece on Monday?
Nicolas Véron: The situation is extremely volatile. The Greek prime minister's decision to hold a referendum was not expected at all. There are enormous areas of uncertainty. About the referendum itself, because it would ask a question about something that will no longer exist by the end of the week. We are in an unknown and unpredictable situation, as we saw with people taking cash out of Greek banks over the weekend.
Is Greece heading for a payment 'accident' on Tuesday 30 June?
It is fairly clear that Greece will not pay its instalment to the IMF on Tuesday. The question is - what are the consequences? The IMF has been quite clear that it would declare Greece to be in default of payment. That does not have any automatic consequences in and of itself for credit rating agencies, and neither does it necessarily for the liquidity policy provided to Greek banks by the Eurosystem. So it is a new stage, of course, but it is only one of the elements of the highly complex game that is being played at the moment.
If at some point the ECB refuses to supply emergency financing to Greek banks, what exactly would happen in Greece this week?
The question is: Can the Bank of Greece continue to send euros to Greek banks so they can fill up cash machines and ATMs? This isn't the only way that money is withdrawn, but it's the most visible way. If the Eurosystem decided to refuse an increase or even reduce the provision of cash to Greek banks, then more and more empty cash machines would have to remain empty.
Is there the risk of the Greek crisis spreading to other eurozone countries?
In a way, not in the short-term because the quantitative easing policy that the ECB has been running since March acts as a kind of anaesthetic on the financial market. Because of the QE policy, there won't be the type of contagion that was seen on the sovereign debt markets in 2010-2011. But all the same, there is no doubt that Greece leaving the eurozone would enormously weaken the zone in the event of any future shocks, whose sequence is difficult to predict. But once it has been proven that it is possible to leave the euro, the eurozone would automatically become more vulnerable. That is the real problem with what is happening at the moment.
What other measures, apart from those of the ECB, could the eurozone activate to guarantee financial stability?
Once a country leaves the eurozone, one can imagine that it would make its construction different, more robust, so as to prevent the events that have just taken place from happening again. I am thinking of what the five presidents of the various European institutions suggested last week, such as the creation of a European bank deposit (savings) guarantee.
That said, we have to admit that the Greek crisis is more political than anything else and therefore, until the political structures of the European Union are changed, we will remain with this fragility that could possibly be fatal because a scenario of the eurozone falling apart cannot be ruled once it has been proven that there is something reversible about the eurozone.
Who would have the most to lose from Greece leaving the eurozone?
Everyone. It would be a lose-lose situation. I think it's obvious that the Greeks have a lot to lose, but so do other Europeans, and that is why it is totally tragic that we are talking about this alternative right now. Afterwards, one can blame the Greek government or the country's lenders, but the fact is, it would be a collective failure on a massive scale.
Is there a good way out of the current crisis?
There are always scenarios of a good way out of the crisis, the question is that if the referendum were to really take place, then I personally would hope that the Greek electorate would vote “yes”. This would be one way to get the discussions back on a much more positive track.
If the Greek electorate votes “yes”, then will there have to be a government reshuffle?
That's a good question about Greek domestic politics. We need to remember that a lot of things are going to happen over the next few days and at the speed at which things are happening at the moment, the vote on Sunday is a long way off. The Syriza government has said that it wants the “no” vote to win. It has also said that the Greek electorate will have its say and the government will take the consequences of the referendum result - assuming that the referendum actually takes place.
There is a glaring clash of democratic legitimacy at national and European level. What measures would make it easier for the people of a country to accept decisions taken at European level?
It is clear that the current governance at European level is neither stable nor effective and doesn't allow a way out of crises in acceptable conditions. Citizens have good reason to be dissatisfied with the way they are governed. There is a democratic deficit problem. I think that great progress was made with the election of Jean-Claude Juncker as president of the European Commission by applying the way citizens voted at the European elections. But that is not enough. The effectiveness of the European institutions, their ability to take decisions and, the other side of the same coin, their legitimacy vis-à-vis the electorate are questions that have been on the agenda for a long time, but the Greek crisis makes them more acute.