May 27, 2011
Greece was only able to join the euro through deception and the currency bloc’s leaders have been “too polite” ever since to deploy adequate sanctions that could have averted the region’s debt crisis, former European Central Bank Chief Economist Otmar Issing said.
“When I worked for the ECB, I suffered every time countries didn’t meet the criteria,” Issing, 75, said in an interview in Copenhagen yesterday. “Greece cheated to get in, and it’s difficult to know how we should deal with cheaters.”
Issing, who joined the ECB a year before the euro’s inception in 1999 and stayed there until 2006, warned yesterday that Greece will probably be unable to honor its debts as it grapples with insolvency. The country’s repayment ability remains questionable even after the government endorsed an accelerated asset-sale plan and a package of budget cuts necessary to draw a fifth tranche of its bailout, he said.
Issing said he blames an absence of adequate sanctions for the currency bloc’s current condition, which he called “critical” at an event yesterday hosted by Nykredit A/S.
“There should have been better monitoring, better scrutiny and more sanctioning,” he said in the interview. “This crisis wasn’t unavoidable.”
The cost to insure Greek debt against default rose to a record this week and the yield on the nation’s 2-year and 10- year bonds increased the most since the euro was introduced in 1999. Yields on Greek 10-year bonds have more than doubled since the country obtained a 110 billion-euro ($156 billion) bailout from the European Union, the International Monetary Fund and the ECB just over a year ago.
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