Bloomberg
German Chancellor Angela Merkel said that Greece is
taking the right steps to get its next bailout payment, warning against
allowing a Greek default because of the risk of contagion for other euro-area
countries.
Merkel, in a German radio interview to be broadcast
today, said that an “uncontrolled insolvency” would further roil markets
spooked by the prospect of a Greek default. The euro region currently has no
system for “orderly” insolvency until the permanent rescue fund is established
in 2013, she said.
“The top priority is to avoid an uncontrolled
insolvency, because that wouldn’t just hit Greece and the danger that it hits
everyone, or at least a number of other countries, is very big,” Merkel told
Berlin-based broadcaster Inforadio. “I have made my position very clear: that
everything must be done to keep the euro area together politically, because we
would very quickly face a domino effect.”
Merkel’s comments are a rebuff to calls by members of
her ruling coalition to consider allowing Greece’s insolvency and exit from the
currency union as it struggles to satisfy the terms of its aid package. They
also belie plans by her government to support German banks in the event that
Greece does go into default. Merkel said her goal is to keep the euro area
together, according to an e-mailed transcript.
“Everybody should weigh their words very carefully,”
she said. “What we don’t need is unrest in the financial markets. The
uncertainties are big enough as it is.”
Greece’s bonds rose, reversing declines that pushed
the 10- year yield to 25 percent for the first time today. The nation’s 10-year
bond yield fell 22 basis points, or 0.22 percentage point, to 23.33 percent as
of 8:17 a.m. in London, after earlier climbing to a euro-era record of 25
percent.
No ‘Taboos’
Philipp Roesler, the vice chancellor and economy
minister who heads Merkel’s Free Democratic coalition partner, said in an op-ed
published in Die Welt newspaper yesterday that there can be no “taboos” when
considering action “to stabilize the euro in the short term,” including a Greek
insolvency.
Finance Minister Wolfgang Schaeuble, a member like
Merkel of the Christian Democratic Union, denied that Roesler was calling for
Greece to be allowed to go into default.
“He didn’t put the plan on the table, he said you
can’t rule anything out,” Schaeuble said in an interview with ZDF television
late yesterday. “Considering every possible variation, you never rule out
everything,” he said. “A government has to consider what should happen in case
of a catastrophe.”
Athens Mission
German coalition officials stepped up their criticism
of Greece last week after a delegation from the European Commission, European
Central Bank and International Monetary Fund suspended a report on progress
made in Athens in meeting the terms of its rescue program. The delay threatened
to derail the next payment to Greece due next month.
Merkel offered her backing for Greek Prime Minister
George Papandreou’s government, saying that a team of officials from the three
institutions is returning to Athens this week, which “suggests that Greece has
taken care of a few things” to meet the bailout conditions.
“Everything I hear out of Greece is that the Greek
government has hopefully seen the writing on the wall and is now doing the
things that are on the agenda,” she told Inforadio.
To contact the reporters on this story: Tony Czuczka
in Berlin at aczuczka@bloomberg.net; Mariajose Vera at mvera1@bloomberg.net
To contact the editor responsible for this story:
James Hertling at jhertling@bloomberg.
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