Osborne says Greek exit would be ‘very damaging’

Chancellor of the Exchequer George Osborne said the danger of a miscalculation leading to a "very bad outcome" between Greece and the euro area is increasing, and the Group of 20 finance ministers are urging a solution.

“It’s clear that the risks to the world economy, the risk to the British economy of this standoff between the euro zone and Greece, is growing each day,” Osborne said in an interview with Bloomberg Television in Istanbul late on Monday. “The risks of a miscalculation or a misstep leading to a very bad outcome are growing as well.”

Osborne, who is in Turkey at the G-20 meeting of finance ministers and central bank governors, said discussions have centered on seeking an approach amenable to all sides in the crisis, which intensified after Greece’s anti-austerity Syriza party won power in Jan. 25 elections.

Britain is stepping up its readiness for a negative outcome, he said. “Here at the G-20, we are urging all parties to this dispute to find some common solutions and we’re also at home stepping up our preparations for whatever the outcome may be,” Osborne said. “A Greek exit from the euro would be very difficult for the world economy and potentially very damaging for the European economy.”

Turmoil risk

Osborne's comments highlight the concern among global leaders that the prospect of Greece exiting the euro could spark turmoil in financial markets, as the new government faces down creditors over the terms of its bailout. In London, Prime Minister David Cameron led a meeting of Treasury and Bank of England officials on Monday on the possible impact of its departure from the common currency. That outcome could be a "potentially chaotic and disorderly exit," Osborne said, adding "there's no doubt that the U.K. economy would be affected by a crisis in the euro zone."

Euro-region finance ministers will meet on Wednesday for emergency talks on Greece, followed by a summit of European Union leaders the next day. That meeting may include discussions of a potential escalation of sanctions on Russia following its continued intervention in Ukraine.

Osborne said he is confident unity can be found on condemning Russia’s actions “because what is not acceptable is for the sovereignty of a sovereign state to be violated” -- though the aim is to find a peaceful solution. “There has been unity on sanctions, I don’t think anyone should bet against that,” Osborne said. “The collective will is there to take further action if it’s required, if the situation deteriorates.”

Bloomberg