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Special> Debt Crisis in Europe> Latest News
UPDATED: June 14, 2012
Greek Exit May Cause Recession in EU

The danger of a Greek exit from the euro zone would not only weaken market confidence but also affect the prospect of Europe as a successful and vibrant group, an Irish economist warned.

"I think it would bring Europe close to a recession, I think that if this was to go on for quite a while Europe could become a bit like Japan in a long term recession," said University College Dublin (UCD) Professor Cathal Brugha.

"I think that a return to growth would be postponed," said Brugha in a recent interview with China's Xinhua News Agency.

Greece will hold a repeat election this Sunday, as party leaders failed to form a coalition after the previous election results produced no clear parliamentary majority.

During the interview, Brugha said he hoped, for the future of the European Union (EU), that the pro-bailout party groups in Greece would be successful, but added Greek voters may need reassurance from European leaders.

He hoped, for the future of the EU, that the pro-bailout groups would be successful, but said Greek voters may need reassurance from European leaders.

"I hope that the pro-bailout groups will win but there's no guarantee that they will. In fact, if it were possible for European leaders to give some indication that they would help Greece more if they vote for a European, a pro-European solution in Greece, then I think that could make a difference."

Brugha said the potential consequences of a Greek exit from the EU could be very serious for all European countries, adding that the scenario could be particularly damaging for Ireland as it may place the country's growth prospects in danger.

"I think it would be particularly bad for Ireland. Ireland is the most open economy in Europe, it's the second most open economy in the world after Singapore. When you look at Irish growth, and Ireland does have growth, a lot of it is dependent on the growth that is in Europe. If Europe were to go into decline, Ireland's growth would be certainly jeopardized and that would be very bad for Ireland."

Brugha said the European institutions had managed the economic crisis poorly and countries like Germany and France have been looking after their own interests.

"I think that many of the problems go back to how poorly the EU has been trying to resolve these issues. I think that the EU is not sure where it wants to go, I think that the Germans and the French were trying for many years to run Europe according to their own views, particularly the Germans."

He then highlighted the European Central Bank (ECB) as the "extremely unsuccessful" EU administrator that failed to "understand the complexities of development of a European economy that also involves politics."

In terms of Ireland's approval of the European Fiscal Treaty, he said it was a sign of the country's belief in the EU and not just a step towards gaining access to funding in the future.

"Part of the reason why Ireland voted for it was because if we didn't we would be cut off from funding in the future but in fact there was another part, and that was that we believe in Europe as a concept, as a partnership," he said.

Brugha said it is time for Europe to make some changes and start to work for the interests of all countries, not just the larger, wealthier member states.

"What we want is a new form of Europe, a new form of global integration where Europe is federalist, many countries coming together, looking for the interests of everybody, not for the interests of the small number and the wealthy and military expenditure.

"So I think that Europe needs to decide what way it wants to go and it cannot go in both directions at the same time," he said.

(Xinhua News Agency June 13, 2012)

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