It's Austerity or Drachmas for Greece: EU Official

Greece may be forced out of the euro if tough austerity measures are not successful, a high-profile Greek politician said in a statement on her website.

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Maria Damanaki, head of Fisheries at the European Commission, said: “The greatest achievement of post-war Greece – the euro and the country's European course – is in danger.”

“The scenario of Greece being distanced from the euro is now on the table, as are ways to do this. I am obliged to speak openly. We have a historic responsibility to see the dilemma clearly," she said.

“Either we agree with our creditors on a program of tough sacrifices and results, undertaking our responsibilities to our past or we return to the drachma. Everything else is of secondary importance,” Damanaki said.

This is the first time a senior European politician has spoken so openly about the possibility of Greece leave the single currency as a result of the debt crisis.

Under current rules, if a euro zone member wishes to give up the euro it must renounce European Union membership as well, as the two were linked in the Accession Treaties with two exceptions, but analysts and politicians have said that these rules could be changed.

Default Unthinkable

Other euro zone members which have had to be rescued by the EU and the International Monetary Fund (IMF) are Ireland, which is receiving 85 billion euros ($122 billion) and Portugal, which is getting a 78 billion euro bail-out.

All three countries are facing harsh austerity measures.

There are increasing concerns from economists and policymakers that Greece may default on its debt repayments and, as many banks in other countries around the continent hold Greek bonds, a default would have a substantial knock-on effect for financial institutions.

Opposition politicians in Athens have objected to plans to privatise some state-backed institutions and cut public spending.

A spokesman for economics commissioner Olli Rehn denied that Greece might return to the drachma.

“The scenario of Greece leaving the euro has not been and is not on the table in the euro group of ministers,” he told The Irish Times.