Worst-case scenario
June 26, 2011
German Finance Minister Wolfgang Schäuble has indicated to the German public that Europe is preparing for the worst-case scenario and will be ready should Greece have to default on its loans.
In an interview with the mass-market German Bild newspaper published on Sunday, Schäuble said he and is European counterparts fully expected the Greek parliament to pass a crucial austerity package in a vote next week, despite stiff resistance from the public and from opposition politicians.
"We are doing everything we can to prevent a perilous escalation for Europe but must at the same time be prepared for the worst," Schäuble told the Bild newspaper.
However, Schäuble warned the Greek parliament that they had to do their bit by passing the austerity measures, underlining that a failure would have a major impact on the stability of the eurozone.
"We would have to quickly ensure that the danger of contagion for the financial system and other euro states is kept in check," he said.
All eyes on the Greek parliament
Greece has been told that it will receive the next 12 billion euro ($17 billion) loan installment only once the harsh package of budget reforms and privatizations has been passed into law. Greece has said it needs the money by mid-July to avoid defaulting on its debt.
The EU wants private creditors - banks, pension funds and insurers - to contribute to a rescue in an "informal and voluntary" rollover of Greek government bonds whereby investors buy new bonds to replace ones that mature.
There are fears that if the participation is not seen as voluntary, rating agencies could declare Athens to be in default.
Schäuble insisted it was in private creditors' "most basic interest" to help Greece for the sake of market stability. He said precise figures on how much the private sector would voluntarily contribute would be decided at a meeting of eurogroup finance ministers on July 3.
The head of the German federation of private banks, Michael Kemmer, pledged that its members would participate in the aid package in an interview with the daily Neue Osnabrücker Zeitung published Saturday. He offered no further details.
Author: Joanna Impey (AFP, dpa, Reuters)
Editor: Sean Sinico