BRUSSELS – Leading European Union finance officials on Monday promised to stand by Greece as a member of the eurozone provided it sticks to its bailout terms and stays the course of its painful austerity program to prevent even worse economic hardship.
Greeks fed up with the painful austerity measures had voted for parties that had promised an end to the harsh austerity measures that had been agreed as part of the country's bailout. Many euro finance ministers attending a meeting in Brussels warned, however, that Athens must stick to the terms of the rescue package if it wants to remain in the 17-nation euro currency.
In return, no one was seeking to squeeze Greece out of the shared currency, said Luxembourg Prime Minister Jean-Claude Juncker, the chairman of the Eurogroup.
"Nobody was mentioning an exit of Greece from the euro area. I am strongly against," Juncker said after the meeting of the group.
The ministers were unwilling however to offer Greece significantly better bailout terms, stressing that whether it leaves the common currency or not, it would take years of belt-tightening to ease its debt.
"An exit will solve nothing," said Belgian Finance Minister Steven Vanackere.
His Austrian counterpart, Maria Fekter, noted that Greece was nevertheless moving closer to such an exit as the main political parties in Athens struggled for a ninth day to create a coalition government. They will gather for more talks on Tuesday and if they fail, new elections will be called.
But in the face of pressure from markets, Juncker put up a united front.
"We are 17 member states being co-owners of our common currency. I don't envisage, not even for one second, Greece leaving the euro area. This is nonsense. This is proproganda," Juncker said.
The main political parties that agreed to Greece's international bailout do not have the majority to create a new government and smaller parties are reluctant to join them, noting that Greeks have clearly voted against the bailout's austerity terms.
"The situation is serious," Fekter said.
The Commission, the EU's executive body, said it was best for Greece to stay with the pack and bear the hardships with conditional aid close at hand.
EU Commission spokeswoman Pia Ahrenkilde Hansen said Greece should remain in the euro. "We believe that this is the best solution for Greece, the Greek people and Europe as a whole."
The gentle tone contrasted with tough talk from her boss, Commission President Jose Manuel Barroso, who told Italian television over the weekend that "if a member of a club does not respect the rules it is better that it leaves the club, and this is true for any organization, or institution, or any project."
Though the Commission noted Barroso was not referring specifically to Greece, his comments were among the closest a leading EU official had come to envisaging the country's exit from the 17-nation financial project.
World markets dropped sharply Monday on fears of the fallout from a potential Greek exit from the currency bloc. The Athens stock index fell more than 4 percent, adding to a sharp drop last week, while European and U.S. markets sustained heavy losses as well.
"Markets continue to feel the pressure and the stakes continue to rise as what was declared unthinkable a year ago or so now starts to permeate mainstream thinking in Europe," said Michael Hewson of CMC Markets.
If Greece were to leave the euro, its banking system would collapse under the weight of foreign debt and the economy would suffer an even sharper downturn. The government would have to default on the euro-denominated money it owes other European countries, shaking the continent's financial system.
Investors would worry that other European countries with weak finances — such as Portugal or even Spain — might eventually leave the eurozone as well, causing severe turmoil in the markets.
Unsurprisingly, no one at the eurozone finance ministers' meeting was directly calling for Greece to leave their currency union.
"I would like Greece to stay in the euro. It's very important that the eurozone stays intact," said Irish Finance Minister Michael Noonan.
But a consensus emerged that the core demands of austerity had to remain intact, whatever the politicking in Athens over a new government or fresh elections.
"We cannot come always back on the decision that we took. It is real tough for Greece," said Juncker's Finance Minister, Luc Frieden.
"Everyone realizes that to control debt, competitiveness needs to be increased, and — too bad for the population — it is translated into some form of impoverishment linked to lower wages," Vanackere said.
He said a return to a national currency would not solve the problem, since it would be accompanied anyhow with strong devaluation.