International Monetary Fund chief economist Olivier Blanchard has warned an exit from the Eurozone would be “very costly” for Greece.
The IMF, along with the European Union and European Central Bank make up the troika of the EU-IMF-ECB that has put up 240 billion euros ($260 billion) in two bailouts for Greece but demanded harsh austerity measures in return.
“We are working with the Greeks to try and find an acceptable compromise, a program which makes sense to both sides,” Blanchard told Bloomberg on the sidelines of the World Bank-IMF 2015 Spring Meetings in Washington Tuesday.
“If it did happen and there was an accident – which could happen – then for Greece it would be very very costly,” Blanchard said adding that the rest of the Eurozone was in much better shape than it was in 2010 to handle the consequences of a Greek euro exit.
If that were to happen, Blanchard said the other 18 countries in the financial bloc should try “to go further in the direction of fiscal union and political union to send a very strong signal that Greece is the exception, not the rule.”
Greek Prime Minister and Radical Left SYRIZA leader Alexis Tsipras is banking on the troika blinking if he holds out the threat of a Grexit that he said could ruin the Eurozone but which they aren’t buying so far.