Get set for ‘chaotic’ Greek exit from euro and more bailouts – Gordon Brown

Published on 16/06/2012 00:00

THE prospect of a “chaotic” Greek eurozone exit is becoming more likely, regardless of the outcome of crucial elections in the country tomorrow, Gordon Brown claimed last night.

The former prime minister said the single currency was reaching a “day of reckoning” and suggested France and Italy would follow Spain in needing a bailout.

It came as the International Monetary Fund issued its latest assessment on Spain’s economy, saying the outlook was “very difficult” and that the government was likely to miss its deficit reduction target.

Mr Brown said the Mexico G20 summit of leading economies, which starts on Monday, was the “last chance” to sort out the turmoil. In an article for news agency Reuters, he claimed even German banks might need extra capital. “Whichever way the Greeks vote in Sunday’s election, a chaotic exit from the euro is becoming more likely: its tax revenues are collapsing, not rising as promised,” he wrote.

“Unable to regain access to markets, Portugal and Ireland will soon have to ask for their second IMF programmes. Sadly, Italy – and potentially even France – may soon follow Spain in needing finance as the European recession deepens. Even German banks, which are some of the most highly leveraged, are not immune from needing more capital.”

He went on: “This newly discovered but elemental characteristic of an economic union – that a lender of last resort is essential – will have to be acknowledged for Spain, Italy and possibly even France, as well as for Portugal and Ireland and for Greece, too, if they stay in the euro.”

Prime Minister David Cameron last night held a video conference with German chancellor Angela Merkel, Italian prime minister Mario Monti, French president Francois Hollande, European Commission president Jose Manuel Barroso and European Council president Herman van Rompuy.

A No 10 spokesman said: “Leaders agreed the need for countries to continue to take the necessary action to secure global economic stability and to support growth. These issues will be the focus of discussions at the G20 meeting.”