July 15, 2015 –Yesterday, TGCOM24 aired an interview of SEP researcher Paolo Canofari, in which he discusses the Greek crisis and the terms handed to Prime Minister Tsipras by the Eurogroup. Below is a rough translation:
P. Canofari: The effect on the spread today is limited because, compared to 2011, the European Central Bank has more mechanisms that can be used to manage fluctuations in the market, measures that also act as a deterrent against international speculation. The policy of quantitative easing implemented by the ECB is a good example. These mechanisms mean that when there is a crisis like that which has happened in Greece, we don’t immediately observe huge changes in the spread, at least not the likes of which we have seen in the past. This prevents the financial contagion from spreading to countries such as Italy, Spain, and others.
With respect to the statement by German finance minister Wolfgang Schäuble that a Grexit will have limited effects—frankly this subject is what I am researching at the LUISS School of European Political Economy. We continue to underestimate the effects of Greece leaving the European union. If Greece abandons the currency, it is true that we are talking about a country of limited size, which means that the effect of its departure on neighboring countries could be, at first, very limited. But we will be creating a precedent, one which suggests that the EMU is not a true monetary union, but a fixed exchange rate zone—a club that can be entered and exited at will. The next time an economic shock hits another member state, a change in government for example, we might again see the need to let them leave. This is a genuine risk, one we should try to avoid at all costs.