ATHENS: Central banks and companies not bracing for a possible Greek euro exit would be making a grave error, Belgium's foreign minister said yesterday, rattling markets already alarmed by Spain's deteriorating finances. Greek elections are due on June 17 and could hasten the country's departure from the currency club should a government intent on ripping up the country's bailout programme came to power. Polls suggest the outcome is too tight to call.
Greece accounts for little more than two per cent of the euro zone economy but could pose a profound contagion threat if it quit the currency area, throwing the spotlight on Portugal, Spain and even Italy.
"There is no organised discussion at the European level along the lines of: what do we do (if Greece leaves)," Belgium's Didier Reynders told the European American Press Club in Paris. "Now, if central banks and companies are not preparing for the scenario, that would be a grave professional error."
EU leaders insisted at a summit that they wanted to keep Greece in the euro zone and they have good reason to, given the losses that could be inflicted on them and the European Central Bank should the country default on its debt.
But sources said the Eurogroup working group - experts who work for the bloc's finance ministers - had told member states to begin making contingency plans for the opposite.
French banks, which are among the lenders most exposed to Greece, have stepped up their plans for a euro zone exit, sources said.
Most economists agree the austerity measures foisted on Greece as part of its 130bn euros bailout will be impossible to deliver since they will drive the country deeper into recession and make debt even harder to cut.
Peter Bofinger, one of the five "wise men" who formally advise the German government on the economy, said Europe should renegotiate the terms of Greece's bailout as they were agreed on overly optimistic assumptions about growth.
"That's very important for both sides, because if you have an uncontrolled exit of Greece, it could lead to a 'Lehman moment' for Europe," Bofinger said.
Meanwhile, three of the Nordic region's biggest banks had their credit ratings cut by Moody's Investor Service yesterday due partly to the euro zone crisis, but the downgrades were relatively mild and showed the banks remain some of the strongest in Europe.
The agency cut the debt and deposit ratings on Sweden's Nordea and Handelsbanken one notch to Aa3. Norwegian group DNB was cut by one notch to A1/C- due to its reliance on market funding and exposure to volatile businesses, such as commercial real estate and shipping.
The downgrades could raise the banks' borrowing costs, although analysts believe they will continue to outperform European rivals thanks to their strong capitalisation and relatively safe loan exposures.