Germany believes the eurozone is now stable enough and has sufficient rescue mechanisms to survive the potential ramifications of Greece leaving the single currency union, Der Spiegel reports citing sources in the German government.
With just three weeks before Greeks go to the snap polls on January 25, the German leadership apparently takes yet another opportunity to remind their Mediterranean partners the eurozone can survive without them.
Calling a potential Greek exit “manageable”, both Chancellor Angela Merkel and Finance Minister Wolfgang Schäuble are adamant that the EU has implemented all necessary reforms since the crisis in Greece first erupted, in order to handle Greece exit from the single currency, Der Spiegel reported citing sources in the German government.
“The danger of contagion is limited because Portugal and Ireland are considered rehabilitated,” the weekly quoted one government source saying.
Another source said that the European Stability Mechanism (ESM), which offers states up to 500 billion euros emergency bailout, is an “effective” rescue tool while the major banks are expected to be protected by the banking union.
According to Der Spiegel report, the German government considers Greek exit from the eurozone a practical possibility if the leftwing opposition, headed by Alexis Tsipras’ Syriza party, wins on January 25.
Syriza is leading the race, according to a number of pre-election polls in the country. The euro-skeptic party is capitalizing on a wave of public discontent with harsh austerity measures that Athens was forced to accept in return for a 240 billion euro bailout.
As to the legality of an EU member state leaving the single currency market, Der Spiegel quoted a “high-ranking currency expert” as saying the issue could be clarified with the help of “resourceful lawyers.”
While the German government could not be reached for comment to confirm Der Spiegel’s report, the Finance Minister Wolfgang Schäuble earlier warned Athens against dropping the austerity program, saying any new government would need to honor the current Antonis Samaras government’s pledges.
“New elections will not change the agreements we have struck with the Greek government. Any new government will have to stick to the agreements made by its predecessor,” Schäuble said Monday.
Meanwhile, Merkel’s chief adviser, Michael Fuchs, warned this week that Germany will not be blackmailed into rescuing Greece anymore. “If Alexis Tsipras of the Greek left party Syriza thinks he can cut back the reform efforts and austerity measures, then the troika will have to cut back the credits for Greece,” he said.
“The times where we had to rescue Greece are over. There is no potential for political blackmail anymore. Greece is no longer of systemic importance for the euro,” Fuchs said in an interview with Rheinische Post newspaper.
In the meantime, speaking at a party congress on Saturday, Tsipras said the European Central Bank (ECB) could not exclude Greece if it embarks on a “quantitative easing” program to stimulate the European economy.
“Quantitative easing by the ECB with direct purchases of government bonds must include Greece,” Tsipras said, as he promised to roll back many of the austerity policies imposed by the bailout.
He also promised to ensure that much of Greece’s debt is written off as part of a renegotiation of its international bailout deal.
“Austerity is both irrational and destructive,” he said as Greece’s debt equates to more than 175 percent of gross domestic product. “To pay back debt, a bold restructuring is needed.”