Greek aid needed to avoid contagion: German central banker

29th April 2010, Comments 0 comments

Providing aid to Greece as a last resort is the best way to avoid its debt crisis spreading to other parts of the euro area, Germany's central bank chief said Thursday, as fears of contagion grew.

"Let me be clear -- aid for Greece as a last resort is in my view the best way to avoid the crisis spreading to other member states and the euro area with extremely negative consequences," Axel Weber told the Bild mass circulation daily.

Concerns that the Greek debt crisis would affect the other 15 countries that share the euro grew after Spain was slapped with a credit downgrade late Wednesday, putting more pressure on the common currency.

Weber said the effects of letting Greece go bankrupt were "incalculable" and stressed that expelling Athens from the euro area was "legally not possible."

"Hard austerity measures in the country will of course not be easy but they will be more bearable than leaving the euro area," he said.

The central bank chief, tipped as a leading candidate to take over the presidency of the European Central Bank when Jean-Claude Trichet steps down in 2011, also said he did not believe banks should participate in the rescue.

The debate over whether Greece's creditor banks should be made to stump up for the bailout was "counter-productive," Weber said.

"We now need to create the conditions where we can negotiate quickly," he added.

Germany has come under huge pressure to agree to a multi-billion-euro joint EU-IMF bailout for Greece, with Berlin providing the biggest single share of the loans.

With a key regional election on May 9 and bailing out Greece hugely unpopular in Germany, Chancellor Angela Merkel has insisted that Athens present a credible and sustainable austerity plan before dipping into her coffers.

© 2010 AFP

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