The head of the Institute of International Finance (IIF), who negotiated on behalf of Greece's creditors during the recent bond swap, has said that the focus on euro zone austerity needs to be balanced with economic reality.
Following the Greek elections in which voters expressed their dissatisfaction with the traditional mainstream parties, Charles Dallara of the IIF toldCNBC “I think Germany will have to, with other euro zone partners, re-evaluate the current economic strategy here and consider adaptations to place the euro zone economy on a more credible path."
Dallara went on to state that re-balancing the growth-austerity program on the current agenda may prove less costly in the long term than allowing the situation in the southern Mediterranean countries of Greece, Spain, Italy and Portugal to deteriorate still further under harsh austerity measures.
Dallara's position reiterates the stance he took last month when he voiced the opinion that short term cuts in Europe may have been overdone and could result in a stifled economy. He told Bloomberg "a contraction of credit in many parts of Europe....is not consistent with the rebound in the European economy that we all agree is needed.”
His words were in direct contrast to the stance taken by the German dominated EU leadership. According to Athens News a senior euro zone source said Greece must "either stick to the programme and receive the financing from member states - or they will have to default. What the default would lead to, I don't know. But certainly to even more hardship for Greek citizens."
Der Speigel has taken the view that Greek voters, by turning their back on corrupt politicians who presided over economic catastrophe, have "once again defied their international partners. They have not been cowed by threats, advice or even the prospect of their own bankruptcy." They cite Angela Merkel is not changing course and has stated austerity is the only solution that must be maintained.
However, the prospect of a Greek exit from the euro zone and its likely contagious effect on other euro zone economies could strengthen the position of those such as Dallara who believe there is a need to rethink the current crippling austerity which dominates the weaker economies of Europe.