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Euro falls on rumours Greece is to quit the eurozone | Euro falls on rumours Greece is to quit the eurozone |
(about 3 hours later) | |
The euro has fallen by more than 1% against the dollar, following a report that Greece had raised the possibility of leaving the single currency. | The euro has fallen by more than 1% against the dollar, following a report that Greece had raised the possibility of leaving the single currency. |
German magazine Der Spiegel reported that a meeting was taking place on Friday evening about Greece readopting its own currency. | |
The claim was vigorously denied by Greece and Germany. | |
However the BBC then learnt that ministers from four eurozone countries were indeed meeting in Luxembourg. | |
The countries - France, Germany, Finland and Netherlands - were said to be discussing EU issues, including the financial situation of Portugal, Ireland and Greece. | |
"The report about Greece leaving the eurozone is untrue," the Greek deputy finance minister Filippos Sachinidis told Reuters. | "The report about Greece leaving the eurozone is untrue," the Greek deputy finance minister Filippos Sachinidis told Reuters. |
"Such reports undermine Greece and the euro and serve market speculation games." | "Such reports undermine Greece and the euro and serve market speculation games." |
Despite the denials, at 2230 GMT the euro was worth $1.44. | |
Denials | Denials |
Reuters news agency said that finance ministers from Germany, France, Italy and Spain were attending the meeting. | |
After the talks the Eurogroup Chairman Jean-Claude Juncker issued a categorical denial that Greece's euro status was up for debate. | |
"We have not been discussing the exit of Greece from the euro area, this is a stupid idea, it is in no way... an avenue we would never take," Reuters reported him as saying. | |
"We don't want to have the euro area exploding without reason. | |
"We have ruled out any restructuring of Greek debt," Juncker underlined, saying the talks were about "discussing European problems in relation to G20 and Eurogroup meetings over the coming weeks." | |
Despite dismissals from officials, the story "does seem to be having a market effect," said Ron Leven, a currency strategist at Morgan Stanley in New York. | Despite dismissals from officials, the story "does seem to be having a market effect," said Ron Leven, a currency strategist at Morgan Stanley in New York. |
But he played down the significance of the report. "For [Greece] to leave the euro is very complicated. It's not like they can just wake up tomorrow and say we're not in the euro anymore." | |
Bailout | Bailout |
Greece became the 12th country to join the single currency when it ditched its own currency, the drachma, in 2002. | |
Over the past decade the Greek government borrowed heavily - public spending soared and money flowed out of the government's coffers. | Over the past decade the Greek government borrowed heavily - public spending soared and money flowed out of the government's coffers. |
However, the revenues the government generated through tax were not enough to counterbalance this, mainly as a result of widespread income tax evasion. | However, the revenues the government generated through tax were not enough to counterbalance this, mainly as a result of widespread income tax evasion. |
The result was a bulging budget deficit, more than four times the limit under eurozone rules. | The result was a bulging budget deficit, more than four times the limit under eurozone rules. |
In the end Greece was forced to accept a multi-billion euro bailout, by the EU and the IMF, to finance its huge deficit. | |
The 110bn-euro ($136bn; £94bn) loan was designed to prevent Greece from defaulting on its massive debt. | The 110bn-euro ($136bn; £94bn) loan was designed to prevent Greece from defaulting on its massive debt. |
But despite a programme of government spending cuts and other reforms, its economy has struggled to keep its head above water. | But despite a programme of government spending cuts and other reforms, its economy has struggled to keep its head above water. |
In recent weeks there has been increased speculation that Athens could default and will need to restructure its debts. | |
Yields on Greek government 10-year bonds have leapt to over 15%, a sign that investors are becoming increasingly sceptical that they will be repaid. |