Greece should quit euro unless "massive" funding given: Czech

Greece should leave the euro zone and devalue its new currency unless Europe is willing to provide "massive" funding for the indebted country, Czech central bank Governor Miroslav Singer said in a newspaper interview.
Singer told daily Hospodarske Noviny Europeans should focus on helping banks which may need recapitalisation and on issues that can be resolved, rather than devoting attention for years to Greece which represents just two percent of the European economy.

"If there is not the will to give Greece a massive amount of money from European structural funds, I do not see any other solution than its departure from the euro zone and a massive devaluation of the new Greek currency," he said in the interview to be published on Monday.

"So far Greece has been given loans that served mainly for buying time and for rich Greeks to move their money out of the country. This lowers the trustworthiness of Europe and the willingness of non-European countries to lend or provide new capital to the International Monetary Fund for helping Europe."

The Czech Republic is a European Union member but has no plans to adopt the euro in the near future. The country has maintained the ability to refinance its debt on the markets and the banking sector is well capitalised and protected by a domestic deposit base.

Asked about what Europe should do to avert the debt crisis, Singer said European politicians should acknowledge that banks may need more capital.

"We have to stop pretending that we will never recapitalise banks again," he said.

"In connection with the Greek crisis, it will possibly be necessary to pour money even into quite large banks which will suffer losses. It is necessary to immediately focus on banks' problems.

"This is however hitting awful obstacles in large European countries. There are politicians who said strong words - never, never never."

Singer criticised the Austrian central bank for publishing, without consultation, a plan in November to require its banks to cover new loans in central and eastern Europe with local deposits, although he said the plan will not impact lending in the Czech Republic.

Austrian banks are major players on the region's banking market.

"This was not a good way and we do not do such things, because we, myself included, consider it to be a sign of weakness, nervousness or error," he said.


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