<span class="lead-text">Willem Buiter, Global Chief Economist of Citigroup, believes there is no way to get around a debt relief for Greece. And even if there was no financial exposure left in the banking system, this would have great repercussions on the financial stability in the eurozone.</span> Almost three years after the haircut on Greek sovereign bonds fears are back, that Athens might leave the Euro. The highly endebted country is set to elect an new parliament on January 25. German media recently reported, that the german Government deems the Eurozone able to cope with a «Grexit».

Willem Buiter, Global Chief Economist of Citigroup <span class="article-stockprice-wrapper">(<span class="article-stockprice-symbol"><a href="http://marktdaten.fuw.ch/detail/stocks?ID_NOTATION=258242" target="_blank">C</a></span> <span class="article-stockprice-instrument_price">47.95</span> <span class="article-stockprice-green">0.71%</span>)</span>, points out that in spite of lower financial exposure of the banking sector, such an event would have major contagious effects on the financial system in the Eurozone.

<b>According to German media, Berlin thinks a Grexit would be more manageable today than 2012. Do you agree?</b> It is true only on a very superficial level. Of course, most of the Greek sovereign debt now is held no longer by private but by public institutions like the European Central Bank or the European Stability Mechanism ESM.

The direct financial spillovers to the private sector would be much lower than in 2012, since many creditors have disengaged. But since such an exit was never supposed to happen the question in the market would be: who is next? And that list gets longer and longer. Besides the usual suspects like Portugal, Spain and Italy now there are worries about France, too. In case of a Grexit Investors would reduce their exposure to other highly endebted countries with slow growth. Even if there was no exposure at all, a Grexit would have an indirect contagion effect.

<b>How much of a threat is the <b>left wing party Syriza gaining consensus in the runup to the elections?</b></b> If Syriza wins the elections, then of course negotiations would be more difficult than with the current government. But unlike other protest parties in Europe, Syriza is anti-austerity – not anti-Euro. And for me there is no shadow of a doubt that Greece will have to restructure its debt.

<b>Will the ECB be able to decline on a participation on a restructuring of debt?</b> She might again get around it, but I don’t see why. Creditors should be treated equally. If they made the wrong investment choice they should bear the consequences, not the taxpayer.

<b>How dangerous would a second haircut be?</b> Like in the case of an exit, direct contagion channels are small. There is only little direct financial exposure. But what hasn’t been reduced is an indirect contagion on a cognitive and political level: if Greece gets a good deal with its debt, then other debtors might want to have a similar treatment. <b>What would a «good deal» be for Greece?</b> Two-thirds of a debt relief would be reasonable. Only then Greece could reduce its debt ratio from currently 170% to 60% of GDP, which is considered to be the maximum for a sustainable debt. <b>Is the financial sector really more robust than some years ago?</b> The banking union is nearly in place. The possibility to bail-in unsecured senior bank creditors will be in place only 2016. And of course, a much bigger backstop would be needed. The ESM is still not adequate in size and much of its potential is already committed. And the OMT-programm is untested – and contested. But on balance, the conditions of banks are better than 2012. But one big opportunity has been missed. <b>Which one?</b> The stress test was a joke, even ECB-officials like Ignazio Angeloni acknowledge that the resulting capital shortfall could be the tip of the iceberg. They claimed to have the same rules for scrutinizing the balance sheets but in the end it shows they allowed for various national exceptions. But again: European banks are at least not in a worse shape than 2012. What is worse is the anti-european feeling. It is growing across the board. <b>Where do you see tensions?</b> Besides the traditional anti-european parties like Front National <span class="article-stockprice-wrapper">(<span class="article-stockprice-symbol"><a href="http://marktdaten.fuw.ch/detail/stocks?ID_NOTATION=35708" target="_blank">NATN</a></span> <span class="article-stockprice-instrument_price">80.05</span> <span class="article-stockprice-green">0.06%</span>)</span> in France, new separatist and anti-european movements arose in Spain, Germany and Italy. Especially Italy has now three anti-european parties: the 5 Stars movement, the Lega Nord and the far-left SEL. In Great Britain, we have elections in May and the risk of a «Brexit» is a real danger, especially as it will dampen capital expenditure. Companies will wait until they see more clearly whether Britain will stay in the EU. And if Britain moves out of the EU, Scotland might want to separate again from the UK. <b>Do you expect the Eurozone to fall back into a crisis mode this year?</b> This is already the beginning of the «Eurocrisis 2015». We will know more after the Greek elections. But there won’t be any way to get around a restructuring of Greek debt. <b>Will it take another «whatever it takes» pledge by the ECB? What do you expect from the ECB-meeting of the 22<sup>nd</sup> of January?</b> The ECB might be too afraid to act under the influence of the Greek election the 25<sup>th</sup>. My best guess is that they will do something rather insipid. What they should do, I think, is to announce a full-scale quantitative easing programme including the purchase of sovereign bonds. They could for instance buy sovereign bonds in proportion of the capital-participation the member states hold in the ECB. And they should buy assets of 1 Trillion € to start with. What they really shouldn’t do is to restrict the purchases to triple-A assets, excluding junk bonds or bonds of periphery countries. <b>We live in a world of stretched valuations and we have seen in the US, that the single rounds of QE had a diminishing effect.</b> A QE will not solve the problems of the eurozone and it won’t be enough for a recovery, and of course the transmission will be limited to liquid assets. But it will compress spreads somewhat further. The real luck for the eurozone is actually the falling oil price. <b>What effect do you expect?</b> We calculate an average oil price over the year of 63$ a barrel. The weaker oil price will have of course losers in the oil exporting countries and winners in oil importing countries. We think though that the overall effect for global growth will be positive. And the eurozone will benefit very much since it is a big net importer. The price drop will have a positive effect on supply and on demand: for production and consumption. We expect that this average price over the year will add 0.3 percentage points of growth for the eurozone. And of course, a weaker Euro will help, too. But to really recover, the eurozone needs to recapitalize its banks, a QE, fiscal stimulus and structural reforms. <b>If the ECB decides to buy sovereign bonds it will break a taboo. Jens Weidmann of the Bundesbank has repeatedly warned against using central bank money to buy bonds. Do you think he should resign in such a case?</b> No, why? I think this idea that the central bank has to decide with unanimity is a misconception. All major central banks decide by majority rule. There are rules that have been decided when the ECB was founded, and one has to stick to them. And if Germany is unhappy with this, it should try to change the treaties. A veto right would be dangerous besides showing a deep misunderstanding of economics.