Greek Mandate Still Unfulfilled

Joerg Asmussen, who in 2011 left the German finance ministry to take a seat on the European Central Bank (ECB) board, said that changing the terms of the bailout would result in “catastrophic uncertainty.” He was quoted saying, “Greece has to be aware that there is no alternative to the agreed consolidation program if it wants to remain a member of the euro zone.” Foreign Minister Jean Asselborn of Luxembourg also spoke out about a possible Greek exit and displayed an unwillingness to consider changing the terms of the bailout. ‘‘If 80% of Greeks want to stay in the euro, then I think they have to support parties that are in favor of this policy of staying in the euro,’’ he said. Otherwise ‘‘comes the point where Greece unfortunately has squandered the opportunity and that will be very, very painful for the people.’’

Even though European treaties have called the euro ‘‘irrevocable’’ and do not offer any legal procedure for a country to depart, either voluntarily or by expulsion, and a December 2009 study by the ECB’s legal department deemed an ouster or departure ‘‘so challenging, conceptually, legally and practically, that its likelihood is close to zero,’’ the likelihood seems to be growing that that will be tested.

When former Prime Minister George Papandreou of Greece called for a referendum on the terms of the second bailout, he found himself booted from government and was replaced by former ECB Vice President Lucas Papademos.

But now that the Greek people have actually expressed displeasure with the bailout in their votes, John Stopford, co-head of fixed income and currency in London at Investec Asset Management, which oversees about $90 billion, said in the report that the next Greek ballot “will be a referendum on continued euro membership. As last week’s election shows, it’s going to be a close-run thing.”

Should that happen, financial markets anticipate the worst. Gillian Edgeworth, a London-based economist at UniCredit, was quoted saying that the repercussions of a Greek euro exit are “potentially huge. The chances of Spain needing official aid would increase, with implications for spillover to others.”

And everyone has an opinion. A Bloomberg global poll found that more than 50% of investors anticipate the departure of a country from the euro zone in 2012.

Jan du Plessis, chairman of the London-based mining company Rio Tinto, said that if Greece left the euro the result would be destabilization of the region’s economy and a blow to global confidence. “Clearly if Greece would leave the euro it would destabilize the European economy to a significant extent,” he said. “It’s one of the things we keep an eye out on all the time.”

Still, Greece has ace in the hole in its quest to renegotiate its bailout terms: some $517 billion in debt. Money owed to private creditors as well as such bodies as the ECB and International Monetary Fund (IMF) will cause more than financial losses if Greece departs.

John Whittaker, an economist at Lancaster University Management School in England, pointed out that “Greece has got some strong cards to persuade them to go easy on austerity.” He added, “Everyone fears a Greek departure from the euro because they’ll lose money and lose political capital.”