Greece Warns That Bailout Failure Means Euro Exit

Details of bailout deal still to be decided as country fears return to drachma

Greece said Tuesday that if it failed to nail down an agreement with its creditors on a 130 billion euro ($169.4 billion) bailout deal formed by the International Monetary Fund (IMF) and the European Union (EU), it would have no choice but to leave the euro and return to the drachma

Greek officials said that move would be “hell,” as they tried to push through deeply unpopular austerity measures.

Reuters reported that government spokesman Pantelis Kapsis said in a television interview on Tuesday, "The bailout agreement needs to be signed; otherwise we will be out of the markets, out of the euro. The situation will be much worse." Kapsis and other officials are trying to woo support, not just from Greek residents for the details of the new agreement, but also from its creditors, who are resisting writedowns that they consider too large.

While a deal was worked out in principle in October by EU leaders, the IMF, EU and European Central Bank (ECB) inspectors, known as the troika, will return to Greece in January to fill in the details. If agreement is not reached by March and Greece does not receive another infusion of funds, it will have no choice but to default and depart the joint currency.

Bankers are resisting a debt swap deal, which is a major factor in the arrangement, and the Greek people have been protesting austerity measures—which may need to be augmented, according to Kapsis. When asked whether the government will need to take more steps to compensate for a shortfall in its goals, he said in the report, "We will see. There could be a need for extra measures."

He added, "The next three to four months are the most crucial and that is the reason this government exists." Greeks have been opposed to many of the austerity measures, but polls indicate that they generally support doing whatever it takes to remain in the euro rather than returning to their own currency.

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