Greek exit would be 'catastrophe', says former Greek PM

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Media captionGeorge Papandreou, former Greek Prime Minister, warns that it is "make or break" time for the eurozone

A Greek exit from the euro would be a "major catastrophe", former Greek PM George Papandreou has told the BBC.

He said Greece was not the problem, but simply a "precedent" amid deeper underlying problems in the eurozone.

Greece holds parliamentary elections on Sunday which analysts say could decide its future membership inside the single currency.

Meanwhile, outgoing World Bank president Robert Zoellick has warned that Europe faces a "Lehmans moment".

Referring to the collapse of the major US bank that served as the catalyst for the financial crisis of 2008, Mr Zoellick, who leaves his post at the end of this month, told the UK's Observer newspaper that: "Europe may be able to muddle through but the risk is rising".

"The could be a Lehmans moment if things are not properly handled."

In another interview with German magazine Der Spiegel, he also criticised European leaders for their lack of decisive action.

"European politicians always act a day late and promise one euro too little. Then, when it gets tight, they add new liquidity," Mr Zoellick said.

"It's no longer so much about which model the Europeans choose. They should just decide on one. Quickly."

The comments come as world leaders prepare for a G20 summit in Los Cabos, Mexico, beginning on Monday, where the eurozone crisis is expected to dominate the agenda.

Over the weekend, Indian Prime Minister Manmohan Singh said he hoped European leaders could take "resolute action", while the official Chinese news agency Xinhua called on eurozone countries to work together.

'Kick out'

Mr Papandreou, whose government negotiated the terms of the first Greek bailout by the EU and International Monetary Fund, warned those who voted for the left-wing Syriza party, one of the frontrunners in Sunday's election, that they "could not have their cake and eat it".

Syriza leader Alexis Tsipras wants to tear up EU loan agreements that have imposed drastic and deeply unpopular austerity measures on Greece, while staying in the eurozone. European leaders have warned that austerity is not negotiable.

If Greece does renege on its loan agreements, many commentators argue it will be forced to leave the euro.

Mr Papandreou told the BBC that, given more time, Greece could abide by the terms of the bailouts.

"The euro is keeping us stable. Leaving would mean a bank run, higher inflation, deep wage cuts and a fall in GDP of more than 20% - it would be a major catastrophe," he said.

But Mr Papandreou said Greece was not the problem. "If it was, you could simply kick out Greece".

He said the underlying problem which needed to be addressed was the architecture of the euro. There was a single currency, but "no unified banking system, no common fiscal policy, and different labour laws and pension systems".

He called for common debt to be issued by eurozone members - so-called eurobonds - and for a financial transaction tax to raise revenues.

"Europe is not making the bold moves. The structures in Europe need to be more integrated and made stronger," he said.

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