Can the Euro survive?

By David Maddox
Political Correspondent
FORMER foreign secretary Jack Straw has warned that the eurozone cannot survive as the Greek economy teetered on the brink of collapse.
The claim - which if true would spell the end for the European project of integration - came as European finance ministers postponed giving Greece a further £10.6 billion of support until the stricken country's ministers agreed to a new round of spending cuts and tax rises.

It was uncertain last night whether the Greek government, which has faced mass protests against the cuts it has already introduced, would be able to deliver on the demands.

But there was also a stark warning from the new head of the International Monetary Fund, John Lipsky, that if the Greek economy was allowed to collapse, it would have a domino effect across the eurozone and could destroy the currency and drag other economies down.

In a statement in the Commons yesterday, Treasury minister Mark Hoban said that the only UK support for Greece would come through the IMF and not a European Union package.

However, he also told MPs that the UK banks were exposed to about £8bn of Greek debt.

The government's stance was attacked by Mr Straw, who said that ministers were "hiding behind weasel words".

He went on to say that the euro "cannot last".

"What the government should do - instead of sheltering behind the complacent language, weasel words 'it's not appropriate, we shouldn't speculate' - is recognise that this eurozone cannot last and it's the responsibility of this British government to be open with the British people now about the alternative prospects," he said.

"If this euro in its current form is going to collapse, is it better not that it happens quickly rather than a slow death?"

There was opposition from Tory right-wingers to any help for the Greek economy, with calls for the country to be allowed to default.

John Redwood, a leading Conservative Eurosceptic, said Greece "needed a work-out rather than another bailout", adding that a second rescue package would be "good money after bad and should not be done".

And his Tory colleague Anne Main said her constituents were angry that they faced cutbacks at home while money was sent abroad to bail out failing economies.

Mr Straw's words were echoed by Mr Lipsky, who said that the crisis in Greece could trigger a world financial meltdown similar to the one suffered by the banks in 2008.

"While courageous attempts have been made to address the crisis, policymakers are yet again facing uncomfortable dilemmas, raising uncertainty about the final outcome," Mr Lipsky said in the IMF's annual healthcheck of the eurozone.

"With deeply intertwined fiscal and financial problems, failure to undertake decisive action could rapidly spread the tensions to the core of the euro area and result in large global spillovers.