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Reinfeldt: Greek vote 'signals major problems'

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Reinfeldt: Greek vote 'signals major problems'
15:28 CET+01:00
The Greek government's decision to call a referendum on the eurozone settlement to write down the country's debt, raises uncertainty over the Greek economy, according to Swedish PM Fredrik Reinfeldt.

Reinfeldt meanwhile played down the threats to the eurozone and dismissed the doomsday scenarios.

"No, it is exaggerated. The Greek economy's share of the eurozone stands at around two percent. But it is however a signal that there are major problems in the Greek economy," Reinfeldt said on Tuesday.

The Swedish PM considers the decision to allow for a referendum to be a reflection of domestic politics.

"This is a manifestation of Greek domestic politics, but in the current uncertainty many people will see a Greek 'no' in a referendum as the beginning of discussions of Greece's status in the euro," Reinfeldt said.

Sweden's foreign minister Carl Bildt revealed on Tuesday that the Greek decision came as a complete surprise:

"You could describe it that way. I have trouble understanding what the issue is. A number of clarifications are required. Do you want to be saved or not, is this the question?"

Bildt argued that the announcement increased uncertainty over Greece's future.

"There are a number of major question marks with regards to Greece and this referendum," said Bildt, who is currently in London to take part in an international conference on internet issues.

Nobel prize winner Paul Krugman meanwhile argued in a opinion article in The New York Times on Tuesday that the he expects the eurozone to fall apart.

Krugman wrote of his expectation that there will be a negative response to the Greek referendum and that Italian interest rates are already at levels which indicate the inevitability of a bankruptcy.

"And with everyone simultaneously pushing for fiscal austerity, a recession seems almost certain, aggravating all of the continent's problems.

Sven-Arne Svensson, chief economist at fund manager Erik Penser, argued that it is likely that Greece will be forced to leave the eurozone.

"My interpretation is that this is the first stage to leaving the eurozone," he said.

Despite the added uncertainty over the referendum on the rescue package, which must first be approved by parliament in a vote expected to take place next week, Svensson expects funds to arrive.

"In some way I believe that the Greeks will get the money they need anyway, if they were to stop payments in November in line with speculation then it would have quite dramatic consequences."

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