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Greek exit 'needs clear response'

By Fu Jing, Wang Xiaotian and Li Xiang (China Daily)

13:42, June 13, 2012

Brussels must coordinate with Washington, Beijing and other global players on capital control measures if Greece exits the eurozone after the general election on Sunday, financial experts warned.

Eurozone finance ministers are reportedly considering a range of options, such as limiting cash withdrawals from ATMs, if Greece leaves the euro.

Brussels has denied that it is preparing such contingency measures for the worst-case scenario - the Grexit, or Greece exiting the euro.

When questioned by China Daily on whether the European Commission can confirm media reports that it is preparing contingency measures, Amadeu Altafaj Tardio, spokesman for Vice-President Olli Rehn, said: "We are not aware of any plan of that kind as reported by a wire service based on anonymous sources."

Rehn is responsible for economic and monetary affairs.

Several sources were quoted by Reuters as saying on Monday that the EU is considering measures, such as capital controls, due to political uncertainties in Greece.

The election may bring the left-wing party, Syriza, into power. The party has constantly spoken out against the austerity measures demanded by Brussels in return for bailout money.

The BBC ran a feature story on Tuesday analyzing how Greece could switch from the euro to its old currency, the drachma.

Opinion polls suggest that about 80 percent of Greeks want to stay in the eurozone.

Francois Heisbourg, a senior adviser with French think tank, the Foundation for Strategic Research, said it is "premature" to ask what measures the EU should take if Greece exits the eurozone and Europe should wait for the results of the election.

But Wang Jianye, chief economist at the Export-Import Bank of China, a major lender that helps domestic enterprises go overseas, said it is necessary for EU officials to get ready for a worst-case scenario.

But such "extreme" measures, if implemented, will backfire, because capital movement is the foundation for economic recovery, he said.

"The consequences would be huge. The US didn't turn to capital controls when it was trapped by the Lehman turbulence."

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