Europe’s governments and banks prepare the ground for a possible Greek exit of the euro, as politicians in Greece try to maintain the country’s position in the single currency.
In Brussels eurozone ministers were not expected to make firm decisions as long as the warring Greek political parties are still talking about forming a government.
The European Commission insisted the austerity plan remained the best option.
Meanwhile German magazine Der Spiegel claimed the German finance ministry is working on plans for a fresh bailout to stabilise Greece if it returns to the drachma.
The eurozone countries are also putting in place a European stability mechanism bailout fund.
But two leading economists told Channel 4 News that the UK is unlikely to play a significant part in providing any further aid to Greece, despite reports that all EU members would be sharing the costs of the Greek exit.
One economist, Stephanie Hare, a senior analyst for western Europe at Oxford Analytica, said these reports were being “floated” by the German finance ministry to gauge countries reaction.
She added that the current UK government were under pressure from Euro sceptic MPs and would not be “pushed around in Europe”.
Prime Minister David Cameron’s official spokesman said Britain will play no part in this, and an earlier mechanism involving the UK is being “switched off” as part of that process.
Asked whether Britain would back the recapitalisation of the European Investment Bank (EIB), the spokesman said: “I don’t think there is any proposal on the table at the moment. We will obviously consider any proposals that are made on their merits.
“We are open-minded about looking at how the EIB can support infrastructure investment. That’s the traditional role of the EIB, so it is something we will look at.”
We are open-minded about looking at how the European Investment Bank can supoprt infrastructure investment. EIB spokesman
In Greece, parliament and government officials have warned that the country could run out of cash as early as the end of June without a government in place to negotiate the next aid tranche with its lenders.
The radical leftist party SYRIZA, which is the second biggest party in the elections says the bailout deal must be torn up.
As many as 78.1 per cent of Greeks want the new government to do whatever it takes to keep their country in the currency, a poll by Kappa Research for the To Vima newspaper showed.
European leaders say tearing up the bailout would require them to cut off funding, allow Greece to go bankrupt and eject it from the European single currency.
European officials who once refused to discuss the possibility of Greece’s exit from the euro now talk about it openly as a real, if painful, possibility.
A prospect once seen as devastating for the continent’s financial system is viewed as more manageable since banks wrote off much of their Greek debt this year.
I guess an amicable divorce – if that was ever needed, would be possible, but I would still regrat it. Luc Coene, ECB policymaker
“Divorce is never smooth,” European Central Bank policymaker Luc Coene told the Financial Times. “I guess an amicable divorce – if that was ever needed – would be possible, but I would still regret it.”
There have already been a number of suggestions of how an “amicable divorce” could be managed through the Wolfson Economics Prize, which challenges the world’s brightest economists to prepare a contingency plan for a break-up of the Eurozone.
One of the five shortlisted finalists is Capital Economics, which is predicting a Greek exit from the Euro this year. The firm suggests that a Portuguese exit is likely next year, particularly if Greece jumps ship first.
Capital Economics’ senior European economist Jennifer McKeown said any Greece exit could mean the European Central Bank or the International Monetary Fund may have to support other European countries whose banks are exposed to Greece debt.
She said that one of these, Germany, could support itself, but that help might be needed for fellow bail-out country Portugal.
“Banks and governments will be making plans behind the scenes,” she said. “The big question is whether there is a big enough firewall to convince people that the contagion would not spread to Portugal.”
Ms Hare said that even if Greece managed to stay in the euro, there was “little hope of Greece getting out of its economic predicament”.
In the very small chance that they get through this, we will be back here in six months’ time. Stephanie Hare, Oxford Analytica
“In the very small chance that they get through this, we will be back here in six months time,” she said.
Ms Hare said she had also noticed a shift in the attitude to a Greek exit at the European level over since the last crisis in October. “They are not freaking out about contagion as they did last year,” she said.
But she added that in the event of a Greek exit, there was no mechanism set out in European treaties to allow any member to leave.
“How this would happen would have to be created on the fly, which is pretty worrying.”