German banks see limited risk of contagion from Greek 'No'

6th July 2015, Comments 0 comments

The German banking federation said Monday it sees little danger of contagion for the wider euro area from the Greek crisis after Greece voted against the austerity measures demanded by its creditors.

"Regardless of the outcome of the referendum, we do not expect an increased risk of contagion for other euro countries," the head of the BdB federation, Michael Kemmer, said in a statement.

Kemmer argued that the new structures put in place in Europe in the wake of the crisis -- such as the European Stability Mechanism or ESM -- would as act as effective "firewalls" against contagion.

"The European Central Bank can also take action if it sees monetary union as systematically jeopardised," he said.

"Furthermore, the other euro countries that have received financial aid have pushed through convincing economic reforms and are a lot more stable than they were three or four years ago," Kemmer continued.

"The immediate fallout of a Greek default for the banking sector in the other euro-area countries should be manageable," he said, pointing out that German banks had substantially reduced their exposure in Greece.

Regarding the 'No' vote itself, Kemmer said the Greek population "has unfortunately opted for apparently simple solutions."

But there is no way around the political realities, he said.

"Far-reaching structural reforms are the only way for the Greek economy to get healthy again," Kemmer insisted.

© 2015 AFP

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