Roundup: Lithuania concerned about possible Grexit

The possibility of Grexit is increasing every day, which drives Europe towards dangerous precedent of not paying certain country's international debts or, otherwise, leaving the monetary union, Lithuanian economists and politicians suggest.

Lithuania's Finance Minister Rimantas Sadzius, said the Grexit would be "black scenario".

"Constructive position is needed now, I mean, concrete proposals (from the Greek side)," Sadzius said in an interview with LRT radio on Wednesday.

"We know what we don't like, but we don't know what we would like, what measures the Greek government would be ready to implement in exchange for a very concrete financial support," he added.

Sadzius repeatedly expressed his hope that Athens and international creditors will be able to find necessary compromise which would mean that Greece will stay within the euro zone, implement reforms and stabilize its economy.

Lithuanian President Dalia Grybauskaite took one of the most rigorous stances in the euro zone on Greece.

She underlined at a special Euro Summit meeting on Tuesday that negotiations on assistance to Greece could be restarted only if its government took on the obligation to implement further austerity measures.

According to the president, "you cannot play poker with the fate of your country and its people."

"Greece is on the brink of default, and its government must tell the people the whole truth, accept full responsibility and take immediate action to stabilize the financial situation," Grybauskaite was quoted as saying in a statement.

Liutauras Gudzinskas, political scientist at Vilnius University's Institute of International Relations and Political Science, believes that trust between Greece and Europe has been lost, hereafter the possibility of Grexit is growing.

"There are various scenarios, however, I would project that the further on, the bigger possibility of Greek exit from the euro zone," Gudzinskas was quoted as saying by local website vz.lt.

"The set of opportunities which would help to keep Greece inside the euro zone is getting smaller," he noted.

Lithuanian society is cautious about the situation in Greece, mostly due to the fresh memories of the aftermath of global financial crisis in 2008 when the Baltic country suffered one of the hardest economy slumps in the EU.

However, Lithuania's exposure to Greek assets and trade is minimal and no direct negative effects from possible Grexit are expected, economists say.

Lithuania implemented necessary reforms and austerity measures after the global crisis in order to get the economy growing and avoid long-term fiscal imbalances, while Greece rejected the anti-crisis measures proposed by the European Commission, the European Central Bank and the International Monetary fund in Sunday's referendum.

Ruta Vainiene, Lithuanian economist, suggests Greece should leave the euro zone. According to Vainiene, negotiations on Greece are extended in time because the EU is concerned about the future of the whole Europe, not just the one of Greece.

"The EU leaders' thinking is broader, because Greece would create a precedent," Vainiene was quoted as saying by LRT.

"Behind Greece, there is Italy, Spain; situation is better there, but nobody knows what would happen after a couple of years," the economist said.

A political battle between those in favor of the euro and eurosceptics is taking place now, she stressed.

Greece would be better off outside the euro zone, while the EU leaders should be more decisive, Vainiene suggests.

"I think this (Grexit) should be the principal EU leaders' position from the economic point of view, but I understand that there are certain binding political conditions; I am afraid, some way to postpone the problem for tomorrow could be found again," the economist noted.

Laurynas Kasciunas, political scientist at Eastern Europe Studies Centre in Vilnius, assumes it is a very complicated task to find the solution, however, Greece will remain dependent on the EU in any case.

According to Kasciunas, there are some "apocalyptical" scenarios such as Grexit and, afterwards, Greek withdrawal from the EU and NATO. However, given the historical geopolitical rivalry with Turkey, the latter would not happen, the expert suggests.

Greece's debt burden accounts for 180 percent of GDP. The country had to pay back the International Monetary Fund a total of 1.6 billion euros (about 1.76 billion U.S. dollars) before June 30, but failed to make the payment because it is short of cash.

Greek Prime Minister Alexis Tsipras told the European Parliament on Wednesday he will present detailed proposal to the EU in the next 2-3 days. (1 euro = 1.10 U.S. dollars) Endit