REPORT: EU Officials Expect A Greek Default, But Think It Will Stay In The Euro

Merkel, PapandreouGerman chancellor Angela Merkel talks with Greek prime minister George Papandreou

Photo: AP

The Telegraph reports that EU leaders generally agree that a Greek default is imminent but  that Greece will not leave the euro.The report cites talks in Paris, Berlin, Frankfurt, and Brussels over how to handle a Greek default in the short to medium term.

In such a scenario, officials expect the European Central Bank to engage in massive purchases of Greek bonds in order to keep banks across the eurozone afloat.

Further, they expect the ECB to use a much larger percentage of its $2.3 billion in reserves than it’s currently employing to expand bond-buying in Spain and Italy as a “firewall” against contagion.

However, EU diplomats evidently think Greece could choose to leave the euro in the long term in order to depreciate its currency.

The report notes that France could stifle these activities, however, if it thought that such measures would compromise its AAA rating.

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