A top German body has called for a clear mechanism to force Greece out of the euro if the left-wing Syriza government repudiates the terms of the country’s €245bn rescue.
“Financial support must be cut off if Greece does not comply with its reform commitments,” said the Institute of German Economic Research (IW). “If Greece is going to take a tough line, then Europe will take a tough line as well.”
IW is the second German institute in two days to issue a blunt warning to the new Greek premier, Alexis Tsipras, who has vowed to halt debt payments and reverse austerity measures imposed by the EU-IMF Troika.
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Crisis stalks Europe again as deflation deepens, Germany stalls
Data from Germany, Italy and Portugal put pressure on ECB to act
Portugal has crashed into deep deflation and Italy’s inflation rate has fallen to zero as the eurozone flirts with recession, automatically pushing these countries further towards a debt compound spiral.
The slide comes amid signs of a deepening slowdown in the eurozone core, with even Germany flirting with possible recession. Germany’s ZEW index of investor confidence plunged from 27.1 to 8.6 in July, the sharpest fall since June 2012, during the European sovereign debt crisis. “The European Central Bank has to act now,” said Andrew Roberts, credit chief at RBS. Continue reading