While many analysts think Greece leaving the Eurozone would be a disaster for the country and financial bloc, billionaire investor Warren Buffett said it wouldn’t be so bad.
Buffet said the 18 other countries who also use the euro could take the blow of a so-called Grexit, without too much jeopardy as Greece has only 2 percent of its Gross Domestic Product (GDP).
“If it turns out the Greeks leave, that may not be a bad thing for the euro,” Buffett told CNBC in an interview March 31.
“If everybody learns that the rules mean something and if they come to general agreement about fiscal policy among members, or something of the sort, that they mean business, that could be a good thing,” he added.
Greece is locked in tough talks with international lenders over undone reforms and as a critical 7.2-billion euro installment is being withheld until more tough conditions are imposed by the new coalition government led by Prime Minister and Radical Left SYRIZA leader Alexis Tsipras.
“I’ve thought that the euro had structural problems right from the moment that it was put it in, which does not mean it will necessarily fail,” Buffett said on CNBC.
“You can adapt to those structural problems, but maybe some countries won’t adapt and they won’t be in. It’s not ordained that the euro has to have exactly the members that it has today,” he said.
FOLLOW THE RULES
Asked by CNBC’s Becky Quick whether it could be a good thing for struggling Greece to leave the 19-country single currency union, Buffett said, “It could be a good idea (in) several ways if everybody learns that the rules mean something.”
“If it turns out that the Greeks leave, that may not be a bad thing for the euro,” he added.
The Chairman and Chief Executive of multinational holding company Berkshire Hathaway said, “It is ordained that over time the countries in the Eurozone have to have somewhat compatible labor laws, fiscal deficits, general management of their economy that don’t result in outliers that really aren’t playing the game the way the rules are supposed to be and we may find out very soon about Greece,” he said.
He stressed that he did not have a bet on where the Eurozone crisis is likely to head, saying, “I don’t have a dime on it.”
“The euro is not dead and it may never be dead but it does have to work in greater harmonization of financial matters in its constituent countries,” he said. ” It can’t live with people going in dramatically different directions. The Germans are not going to fund the Greeks forever.”
Germany is the biggest contributor to two bailouts of 240 billion euros ($272.5 billion) from the troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) that has been coming since 2010 and is going to run out early next year.
Petros Doukas, former deputy finance minister of Greece, told CNBC that the country needed to introduce an aggressive reform package immediately.
“We need to reform the economy, we need much more pro-market legislation—and the government is not moving in that direction,” he said.
“The government is trying to convince Europe that by collecting more taxes the problem will be solved. But it won’t be solved and we need to get a much more aggressive reform package to Europe and we’re not doing that.”
He added however that Europeans needed to be more patient with Greece, despite the “snail’s pace” of reforms, as the countdown goes on.