Giscard says Greeks should consider euro exit

7/12/2011

By Geert De Clercq, Elizabeth Pineau

Former French President Valery Giscard d’Estaing, once a champion of Greece’s EU membership, now believes Athens should consider leaving the euro single currency to avoid inflicting the pain of deflation on its people

Giscard is a longtime friend of Greece. He pressed Greece’s EU candidacy over German objections, clearing the way for Athens to join what was then called the European Economic Community in 1981. Two decades later Greece joined the euro.

In an interview at his Paris home, Giscard said Greece faced a difficult choice. On Tuesday, the Greek government approved another round of austerity measures as protesters clashed with police outside parliament. Its economy will shrink again next year, a fifth straight year of recession.

“Greece could stay in the euro zone but it is very difficult to achieve economic recovery with a strong currency,” the 85-year-old former president said. “Is it better to use a national currency for a period, or have the safety of a strong currency? It is Greece’s choice.”

Giscard said that had Greece kept the drachma, it would probably have devalued by 40-50 percent by now. He feared the Greek people would not to accept the 40 percent internal deflation that the country’s economy needs. “That approach has huge human, social and political costs.”

But he had no doubt Greece would remain in the European Union, whether inside or outside the euro. Asked about French President Nicolas Sarkozy’s repeated assertion that it would be disastrous if one country were to leave the euro, Giscard said: “He is wrong.”
INSTANT TREATY

Giscard, the most pro-European among French conservative politicians of his generation, was defeated by socialist Francois Mitterrand in 1981. He was the main architect of the draft European Constitution, drawn up by a congress of national and European lawmakers that he chaired. French and Dutch voters rejected the charter in referendums in 2005.

The text was largely recycled in the Lisbon Treaty, negotiated in 2007 and approved by national parliaments and - at the second attempt - in an Irish referendum in 2009. The document redefined European institutions.

He said that European leaders at their summit in Brussels on Thursday and Friday, widely seen as a final chance to get on top of the euro zone debt crisis, should forget about trying to revise European treaties.

“Reforming treaties that have to be modified by unanimous vote is impossible. Choosing the path of treaty revision with 27 (EU members) would make the crisis last and would give the impression that it is intractable,” he said.

Instead, the 17 euro zone states should consider drafting a simple agreement among members of the single currency, similar to the Schengen agreement that introduced passport-free travel within 22 EU and non-EU states.

“It must be done very quickly, in the first quarter of 2012, a Schengen-type agreement driven by France and Germany and including other countries like Belgium and Italy. But it should only be open to euro zone countries, otherwise it will be a mess,” he said.

The possibility of a smaller and more integrated core euro zone has been discussed by senior French and German civil servants, officials told Reuters last month. “I think that in the end that is how it will happen,” Giscard said.

On Friday, EU leaders will review Franco-German proposals to reform euro zone governance via an amendment to the EU treaty to bring about more fiscal discipline. Giscard said leaders must agree quickly on debt and deficit limits and on sanctions for those countries that do not respect the agreement.

If some countries found the debt and deficit requirements under the new treaty too severe, they should return to their national currency, he said. “It is necessary to allow for the possibility of euro zone exit. This must be done under conditions that are correct, and not punitive,” he said.

Giscard said Europe needed to fight speculators against the euro, whom he suspected were mainly American.

“Europe is like a city under siege. A big city, with a large population, and a strong economy. If its leaders do what needs to be done, this city will be free again,” he said.

But Europe could do this without American help. U.S. Treasury Secretary Timothy Geithner, who is touring Europe this week to press EU leaders for more decisive crisis management.

“Geithner’s visit is inopportune. He should not be meddling in European affairs. “The French do not go take part in Federal Reserve meetings; who has ever heard of such a thing.”

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