Speculation over the weekend that Greece could leave the euro zone was “utterly unrealistic" and would be a “catastrophe” for the country and for the wider European Union, Yiannos Papantoniou, former Greek finance minister and president of the Centre for Progressive Policy Studies told CNBC on Monday.
Papantoniou said any such move would put Greek debt to beyond 200 percent of gross domestic product which would be "absolutely astronomic" while for Europe the move would herald the dissolution of the euro zone, which was “not in the interest of anybody.”
“I think we should forget this and cease talking about it in an official manner; of course we cannot prevent people like heads of research centers talking about it. But it is totally unrealistic and out of the agenda,” he said.
He added that finance ministers across Europe needed to focus on how to help Greece repay its debt and regain its credibility in the markets and called on the Greek government to accelerate its plans to deal with its debts and reshape its economy.
“The first thing is we need a broader political consensus in Greece among the main political parties to support a dramatic acceleration in the pace of structural reform, liberalization, privatization, regulation and the fight against bureaucracy and corruption,” he said.
“And second we need a competent team to implement them. Once these things are done and Greece restores its credibility, the market’s confidence in its capacity to surmount its problems [will return]. Then we can discuss ways to help Greece either through new loans or other ways relieve the burden of debt servicing,” Papantoniou said.
But Papantoniou also said that Europe had a bigger role to play in restoring market confidence and that it must now press ahead with its plan for greater fiscal unity and the common Eurobond which he said should be introduced immediately rather than wait until 2013 or 2015.
“Unless Europe makes substantial steps for fiscal unification, through Eurobonds, I don’t think any efforts of the Greek people to save the euro zone will be effective so it’s a double act,” he said.
“Greece must do its act by creating a government of broadly economic consensus and more effective than the present one but Europe must do its own act reforming and substantiating its economic governance so as to be able to become able to give effective assistance basically through new terms and news loans for Greece to overcome its problems," he said.
"So it’s a complicated political exercise and the challenge for political leaderships around Europe is very, very high and very big so as to face down this crisis," Papantoniou added.