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Greece in euro zone an error: Sarkozy

business Updated: Oct 28, 2011 20:56 IST
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Nicolas Sarkozy on Thursday threatened to take the shine off a day of jubilation in financial markets at a deal to rescue the euro zone, when he said it had been an “error” to allow Greece to join the euro.

Amid more protest on the streets in Athens, the French president tried to convince the public to back reforms intended to maintain Greece’s membership of the single currency. “It was an error because Greece entered with false [economic] figures ... it was not ready,” he said.

Sarkozy told French TV: “We had to face up to all this. If the euro had exploded on Wednesday night, all of Europe would have exploded. If Greece had defaulted, there would have been a domino effect carrying everyone away ... we took important decisions that avoided catastrophe.”

His remarks underline the continuing frailities of the euro zone, and illustrates the task Europe’s leaders have in trying to hold the currency together.

But shares soared as the world’s financial markets expressed confidence that the package of measures which emerged from an all-night summit in Brussels signalled an end to the long-running debt crisis.

Analysts said the deal was short on detail and the crisis could re-emerge next year; there was also concern that borrowing costs for Italy, seen as the litmus test for the package’s success, were little changed.

Sarkozy on Wednesday spoke to Hu Jintao, the Chinese president, at the beginning of what is likely to be a lengthy charm offensive. Further discussions are likely to take place at next week’s G20 summit in Cannes. China welcomed the progress made at the Brussels summit.

Describing the EU measures as more of a “peashooter” than the promised “bazooka,” Jonathan Loynes, European economist at Capital Economics, said: “We now expect the economy to stagnate in 2012, with a high chance of a technical recession.”