The future of the euro may be determined in the coming weeks, as Greek voters decide whether to honor the country’s international bailout and create a first test for Spain’s newly built 100 billion-euro ($125 billion) banking firewall.
With Greece going to the polls in six days, the most recent surveys showed the main party opposing the terms of its bailout vying for first place. The government in Athens has “a few weeks” before exhausting its funds, making this is “a make-or-break period,” former Greek Prime Minister George Papandreou told Bloomberg Television in a June 8 interview.
The currency bloc, which at its setup in 1999 capped Europe’s progression from war to prosperity, was declared irreversible by its founders. European Union treaties make no provision for a country to withdraw from the currency and the European Central Bank’s legal department said in December 2009 that an expulsion “would be so challenging, conceptually, legally and practically, that its likelihood is close to zero.”
“The currency union can’t function sustainably the way it is at the moment,” Weidmann, who is also Bundesbank president, was cited by the Berlin-based paper as saying. “We need more clarity if we want to go down the route to a fiscal union, or if we want to keep relying on self-responsible national budget policies. In the latter case, the common liabilities need to be narrowly limited.”