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Greece's Deputy Prime Minister Theodoros Pangalos has blasted suggestions that it would be better for his country to abandon the euro and return to the drachma as an "immense stupidity".
"Those who say this are extremely stupid. While they may be analysts, university professors or economists, saying that is an immense stupidity," Pangalos told daily Spanish newspaper El Mundo in an interview published Sunday.
Debt-wracked Greece has been told by European peers that it cannot hope to continue receiving aid from a 110-billion-euro rescue package agreed with the EU and the IMF last year without biting budget reforms and privatisations.
The Greek parliament will vote on an austerity package this week but some economists have argued that Athens needs to restructure its debt and leave the euro to become economically competitive again.
"Returning to the drachma would mean that on the following day banks would be surrounded by terrified people trying to withdraw their money, the army would have to protect them with tanks because there would not be enough police," said Pangalos.
"There would be riots everywhere, shops would be empty, some people would throw themselves out the window ... And it would also be a disaster for the entire European economy."
The austerity measures the Greek parliament will vote on later this week to keep the country's huge debt viable and persuade international creditors to extend additional assistance, are worth more than 28 billion euros ($40 billion) for the period 2011-2015.
Athens also intends to sell partial or full stakes in a host of state entities, aiming to raise 50 billion euros to reduce the overall Greek debt of more than 350 billion euros.
THE dire situation in Greece has the potential to cause a second global financial crisis and we all need to factor in that possibility along with the impact of the fallout on our finances....
The European Union and the IMF have a finite amount of money to bail out countries. The fear is, if Greece defaults on its debts, the interest rate on loans to other PIIGS will soar to a point they could default and there won't be enough money to bail them all out.
It's a scary prospect. Yes, Europe is a long way from us, and we're more linked to the prosperity of China and other Asian nations, but we won't be immune from another global financial crisis.
Just like the last GFC, global share markets could crash, ours will follow and that will hit all our superannuation returns.
Banks globally are big investors in European government bonds. If some of those countries (such as the PIIGS) default on their debts, those bonds won't be repaid, the banks will suffer big losses and they'll tighten credit to customers.
This will cause another credit squeeze, which will hit all economies not a pretty prospect.The IMF and EU are determined to stop Greece triggering the fall of dominoes.
Let's hope they succeed. Follow it closely.