Europe will cope if Greek aid package fails: Germany

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The eurozone is preparing for the worst in the Greek debt crisis and will cope should Athens default on its loans, German Finance Minister Wolfgang Schaeuble said in an interview published Sunday.

Schaeuble 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.

Schaeuble 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, fell 4.7 percent as a result -- the worst performance in the postwar period. But he noted that the country had since returned to growth.

Schaeuble nevertheless 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 must 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 out of a 110-billion-euro rescue package agreed with the EU and the IMF last year without biting budget reforms and privatisations.

Finance ministers from the 17-nation eurozone are to meet on July 3 -- days ahead of a deadline for Greece to repay maturing debt or face default.

© 2011 AFP

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