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Finance Minister: Eurozone could survive Greek default

The Local · 26 Jun 2011, 12:37

Published: 26 Jun 2011 12:37 GMT+02:00

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Schäuble said he and his European counterparts fully expected the Greek parliament to pass a crucial austerity package this week despite massive street protests and resistance from the opposition, but would manage if it did not.

"We are doing everything we can to prevent a perilous escalation for Europe but must at the same time be prepared for the worst," he told the Bild am Sonntag newspaper.

Schäuble said the experience from the 2007-2008 global financial crisis, triggered by the bankruptcy of the US investment bank Lehman Brothers, showed that the world economy could bounce back from a disaster.

"If things turn out differently than everyone expects, that would of course be a major breakdown. But even in 2008, the world was able to take coordinated action against a global and unpredictable financial market crisis," he said.

He acknowledged that gross national product in Germany, the eurozone's biggest economy, had fallen by 4.7 percent as a result - the worst performance in the postwar period. But he noted that the country had since returned to growth.

Schäuble nonetheless warned the Greek parliament against failing to pass the austerity package, underlining that it would have a major impact on the stability of the eurozone.

"We would have to quickly ensure that the danger of contagion for the financial system and other euro states is kept in check," he said.

Debt-wracked Greece has been told by its European peers that it cannot hope to continue receiving aid from a €110 billion rescue package agreed with the EU and the International Monetary Fund last year without biting budget reforms and privatisations.

The EU wants private creditors - banks, pension funds and insurers – to contribute to a rescue in an "informal and voluntary" rollover of Greek government bonds whereby investors buy new bonds to replace ones that mature.

It fears that if the participation is not seen as voluntary, rating agencies could declare Athens to be in default.

Schäuble insisted it was in private creditors' "most basic interest" to pitch in to help Greece for the sake of market stability.

Story continues below…

"I expect precise figures as to how much the private sector in Europe will voluntarily contribute at the special meeting of the Eurogroup [finance ministers from the 17-nation eurozone] on July 3," he said.

The head of the German federation of private banks, Michael Kemmer, pledged that its members would participate in the aid package but offered no details in an interview with the daily Neue Osnabrücker Zeitung published on Saturday.


The Local (news@thelocal.de)

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Your comments about this article

13:23 June 26, 2011 by Bushdiver
The only difference between 2008 and Lehmann Brothers is that Greece is only the beginning. There will be other countries over time that will probably wind up in Greece's situation. Other weaker EU countries will find it hard to keep up with the likes of Germany and France.
15:51 June 26, 2011 by Celeon
I dont give anything on predictions anymore.

Nobody knows what will and what wont happen for sure.

If you would have asked them in advance, the manufactures of the Titanic would have also said that she "could survive" the collision with an iceberg even if her hull was ruptured.

She could have stayed afloat yes, under not all too bad circumstances like just a few holes less in the hull but ....
18:00 June 26, 2011 by MJMH
After reading this article it sounds like Schäuble almost expects the Greeks will default and are merely preparing the public.

Seems like lately this is the way the government leaks information...just a bit of what if's here and there to cushion the blow.

I wonder what will be said when Ireland and Portugal need more. Then when Spain, Italy and Belgium are in the same boat how will the news be presented. No doubt it will be something like the EU must survive at all costs and we the tax payer should be happy that the EU is nothing but a transfer union.
23:10 June 26, 2011 by toemag
"Don't panic", things are worse than you'd believe, but we'll keep the truth from you for as long as possible. Okay Obama has just released a large portion of his strategic fuel reserve onto the market to lighten the burden of over taxed but otherwise cheap fuel, not that we here in Germany have noticed any change due to the bank holiday weekend. Our talking heads want to give us a tax break in 2013, although they could give us all a break and set the VAT back down to 17% tomorrow, but they won't as they'll be using that one to secure their re-election.... Then there is the little problem of them of the €U persuasion repeatedly buying their own debt... Nope, things are going to turn bad real soon unless someone in power recognising what is happening and does something about it, due to the Lisabon treaty that would mean that our none elected €U president and his side kick would have to intervene..... Good luck to one and all, we'll be needing it, soon, very soon.
04:26 June 27, 2011 by german-guardian
Germany is helping Greece because it is like a true friend, and true friends help each other when in need. May God bless Germany, and God bless Europe, and God bless everybody. Peace to all, and goodness for every country. Go German women football team and win the 2011 world cup.
19:17 June 27, 2011 by MJMH

Keep your head stuck in the sand and soon all of Europe will be voting for the far-right. And I would like to thank-you.
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