Greece’s euro exit would destabilise world economy, the European Central Bank and the contagion will affect other countries like Italy, Spain and Portugal, too, head of Institute of International Finance (IIF) Charles Dallara said in an interview. He urged a European realistic approach to austerity.
The head of the global banking lobby which handled the private debt write-off for Greece warned yesterday that if the country leaves the eurozone, the world economy would suffer badly.
The head of the Institute of International Finance (IIF), Charles Dallara, also urged the European Union to set up a system to guarantee savers’ deposits in banks.
And he suggested that the timetable for eurozone governments with severe debt problems to correct their public finances should be eased to allow time for growth to ease the effort, arguing for a “more realistic” approach.
Banks in Greece and Spain in particular have been weakened recently by heavy withdrawals of savings.
“It is a mistake to think that an exit by Greece from the eurozone will not have a very serious effect on the European banks, on the ECB (European Central Bank), on countries like Italy, Spain and Portugal due to contagion,” he told Il Sole 24 Ore newspaper.
“Furthermore, it would destabilise the whole world economy,” he said.
European authorities need to clarify the dimensions of the problem and move towards a targeted European intervention.”
He said the eurozone needs a “more realistic approach” towards austerity to avoid killing off growth, and warned against “too much insistence on reducing short-term deficits while the aim should be medium-term sustainability.” (Times of Malta)