German central banker warns of Greece 'contagion'

23rd April 2010, Comments 0 comments

Germany's central banker, Axel Weber, Friday warned that the risks of contagion from the Greek debt crisis had increased in recent weeks with many countries running "excessive budget deficits."

"The risk of contagion has increased over the last weeks," Weber told reporters. "Many countries are running excessive budget deficits."

Greek Prime Minister George Papandreou earlier Friday admitted defeat in his attempts to stand against huge debt and deficits, in a dramatic televised statement where he described an EU-IMF rescue as "a national need."

The EU said immediately that it would give "rapid" and "efficient" treatment to the request, and International Monetary Fund head Dominique Strauss-Kahn said the fund would "move expeditiously."

Germany however is furious that Greece has been able to borrow for years at rates close to German rates by virtue of being in the eurozone, but on misstated data which EU authorities let pass.

Germany remains central to the rescue, since it is reluctant to allow Greece steeply concessionary rates, of around 5.0 percent. Chancellor Angela Merkel is under pressure from hostile public opinion and a risk of action before the constitutional court.

For the European Union and the eurozone, the entire Greek crisis is an enormous blow in terms of immediate stability and prestige, but also clears away some of the damaging uncertainty.

© 2010 AFP

0 Comments To This Article