German minister says Greek 'orderly default' possible

11th September 2011, Comments 0 comments

German Economy Minister Philipp Roesler said Europe could no longer rule out an "orderly default" for Greece as it struggles with a crippling debt crisis, in a column to be published Monday.

"To stabilise the euro, we must not take anything off the table in the short run," Roesler, who is also Germany's vice chancellor, wrote in the column for the conservative daily Die Welt.

"That includes as a worst-case scenario an orderly default for Greece if the necessary instruments for it are available," he said, reviving an idea that surfaced last year to grapple with the turmoil wracking the eurozone.

Roesler said an orderly default process would mean "re-establishing the affected state's ability to function, perhaps with a temporary restriction of its sovereign rights".

He called Greece's deficit-reduction measures "insufficient" to address the crisis, which he said undermined confidence in the common euro currency.

"The Greek government must know that we will make the planned aid contingent upon Greece actively undertaking its own reform measures," he said.

He called for automatic sanctions against repeated violators of the European Union's rules on debts and deficits -- a measure opposed by fellow eurozone heavyweight France.

German Finance Minister Wolfgang Schaeuble also doubts that Greece can avoid bankruptcy and is preparing for a scenario where the debt-stricken nation becomes insolvent, Der Spiegel magazine reports in its Monday issue.

Der Spiegel said that finance ministry officials were contemplating two scenarios should Greece become bankrupt: one where the country stays in the eurozone, and another where it re-introduces its former currency, the drachma.

The finance ministry was not immediately available to comment on the report.

Eurozone leaders announced a 159-billion-euro ($223-billion) rescue package for Greece in July, but German Chancellor Angela Merkel insisted Sunday that the Greek government must not waver in its reform drive.

"Greece knows that credit is only available if it meets its obligations," she said told Berlin's Tagesspiegel newspaper.

© 2011 AFP

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