European Central Bank board member Ewald Nowotny has just said something pretty worrying about Greece.
When asked on TV, he indicated that he thinks the risks of contagion in the rest of Europe from a Grexit (Greek exit from the eurozone) are manageable and that it wouldn’t have the impact it would have two years ago.
Here are his comments, from Reuters:
“One should not overestimate the whole story,” Ewald Nowotny, a member of the European Central Bank’s policy-setting Governing Council, told broadcaster CNBC. He said he did not expect a deal when euro zone ministers meet later this week.
“It (a Greek exit) does not have that impact or potential impact on the euro zone as it would have had … some two year’s ago. I really don’t see a contagion in the financial and economic sense,” adding, however, that he could not predict the “psychological effect”.
Now, that’s a normal thing for a lot of people to say — it seems like it’s the consensus position among analysts these days. But from a senior central banker in Europe, it’s much more serious.
Usually an ECB official would reply to that sort of question by saying that the ECB expects Greece to remain a full member of the eurozone. Any hint that the central bank expects or is even planning for Grexit could spark financial panic.
And it contradicts Greek finance minister Yanis Varoufakis’ comments yesterday on Spanish TV, in which he said that “anyone who toys with the idea of cutting off bits of the euro zone hoping the rest will survive is playing with fire.”
Bloomberg TV’s Hans Nichols is pretty unequivocal in his reaction:
When a central banker says, as Austrias Ewald Nowotny just did, that contagion from Greece will be *limited*, start looking for old drachmas
— HansNichols (@HansNichols) April 20, 2015