JIM O'NEILL: 'If You Really Put A Gun To My Head, I Say Greece Stays In'

jim o'neill

Photo: Bloomberg

Jim O’Neill, Chairman of Goldman Sachs Asset Management, has been making rounds lately, telling reporters at Bloomberg and CNBC that—no matter how bad things look for Greece—a Greek exit from the euro just isn’t in the cards right now.Instead, he believes “this will be a story that will be discussed repeatedly for more than another year.”

He told Bloomberg in an interview today:

“I can’t really see what the great attraction for Greek voters is…I interpret that vote as more of a protest and elect this guy, but I don’t think they equated it with, ‘Oh my gosh! we’re not in the euro!’…

The polls have shifted back to suggesting a more centrist would in. So if you really put a gun to my head I say Greece stays in.”

That’s not to say that EU leaders won’t make some concessions to convince Greece that staying the course is really the best plan. Again from Bloomberg:

“In order to make it more tolerable, there will be some incentives that have been offered. We might get a flavour of that more broadly at the EU dinner this evening. But yes, that’s almost definitely been put on the table.”

He argues that neither Greece nor the rest of the eurozone is ready to make the jump. Appearing on CNBC he said:

“Once one [country] exits, it breaks this notion of [the European Monetary Union] being a true currency union…So that is a big moment, and they will have to respond really very quickly and very critically to not only just ringfence the others but to make it clear to everybody that nobody else is going to leave.

And of course, it would be really difficult to persuade investors to believe that unless they did really dramatic things. And as I’m saying it I’m thinking here in my mind that [all] those issues [are] part of the reason that Greece might not leave.”

At the same time, Greece isn’t ready to take the plunge either. From his interview with Bloomberg:

“Greece is still dependent on foreign financing. It’s not got a primary surplus. When you really, really go to the core issue—why would they walk out now?…

It would be more conceivable and in their own self-interest to decide that when they don’t need money from overseas, they have a primary surplus.”

He believes that any ultimate crisis solution will ultimately be decided by France and Germany, and is likely to include common euro area bonds. From CNBC:

“The German and French have to really decide if they want this thing or not…They’ve got to behave as a true euro group or not…They have to go some version towards the United States of Europe.”

He elaborates in his interview with Bloomberg:

“My own working assumption is that if the euro exists in five years time, eurobonds will be part of it…If you look at past crises, the ultimate policy response ends up happening way before policymakers want to do it.”

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