British Official Warns Of Euro’s Collapse
London, England, United Kingdom (AHN) – Office of Budget Responsibility member and former Bank of England rate-setter Stephen Nickell warned Monday of the possibility that the euro could collapse.
Nickell said that currency unions are at risks of failure for various reasons, but it does not happen all the time. However, he placed the probability of the currency’s collapse at a low of 1.7 percent.
The British official’s comments came amid divisions in the eurozone after Belgian Finance Minister Didier Reynders asked for an expansion of the bailout fund. However, Germany, the Netherlands and Austria opposed requests by weaker eurozone member-states for a higher amount of bailout.
The opposing ideas revived market fears, causing the cost of insurance for Irish, Greek, Portuguese, Italian and Spanish sovereign debt to go up.
On Tuesday, International Monetary Fund head Dominique Strauss-Kahn was scheduled to arrive in Greece. Greek Prime Minister George Papandreou will use the occasion to negotiate an extension of the repayment period of Athen’s $142.5 billion (GBP 95 billion) rescue package granted in May by the European Union and IMF.
Athens sees the extension could lessen fears that Greece will have to restructure its debt on the expiration of the bailout in 2013. The EU and IMF are expected to give Greece until 2024 to repay the emergency loan.
The EU, however, expressed concern over the lack of progress with Greece’s reforms based on a Eurostat report that Athen’s public debt would grow to 160 percent of the country gross domestic product in 2013.
The other indicators of Greece’s economic performance that are raising the alarm in the eurozone are the expected 15 percent unemployment rate in 2011, 2 million Greeks living below the poverty line, and the closure of more than 25,000 businesses since May.
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