Greece’s Varoufakis warns of Grexit contagion

Greece’s Finance Minister Yanis Varoufakis said in an interview broadcast on Sunday that if Greece were to leave the euro zone, there would be an inevitable contagion effect.

“Anyone who toys with the idea of cutting off bits of the euro zone hoping the rest will survive is playing with fire,” he told La Sexta, a Spanish TV channel, in an interview recorded 10 days ago.

“Some claim that the rest of Europe has been ring-fenced from Greece and that the ECB has tools at its disposal to amputate Greece, if need be, cauterize the wound and allow the rest of euro zone to carry on.”

“I very much doubt that that is the case. Not just because of Greece but for any part of the union,” he said, speaking in English.

“Once the idea enters peoples’ minds that monetary union is not forever, speculation begins … who’s next? That question is the solvent of any monetary union. Sooner or later it’s going to start raising interest rates, political tensions, capital flight.”

His comments were recorded before those of Mario Draghi, the European Central Bank’s president, who this weekend said the euro zone was better equipped than it had been in the past to deal with a new Greek crisis but warned of uncharted waters if the situation deteriorates.

Greece’s leftist government is trying to negotiate a deal with its lenders from the European Union and the International Monetary Fund to unlock further aid under its 240 billion euro bailout.

Euro zone deputy finance ministers gave Athens last Thursday a deadline of six working days to present a revised economic reform plan. Euro zone finance ministers will meet on April 24 to decide whether to unlock emergency funding to keep Greece afloat.


Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell