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Greek euro coin
Greece's debt has shattered confidence in the euroImage: dapd

'No more taboos'

September 12, 2011

As confidence in Greece's ability to control its public debt weakens, politicians in Germany are becoming more pessimistic about the country's future. Bankruptcy and a return to the drachma are no longer taboos.


European stocks tumbled Monday on renewed fears that Greece would default on its debt, as German politicians gave a more pessimistic view of the country's situation.

The German DAX briefly dropped below 5,000 points at the open on Monday and the euro fell to a 10-year low against the yen.

The drop in markets followed a newspaper commentary by German Economy Minister Philip Rösler published Monday which said bankruptcy should be an option for addressing Greece's debt problems.

Rösler, also vice chancellor and leader of the pro-business Free Democratic Party (FDP), wrote in Monday's edition of the daily "Die Welt" that there must be no more taboos in discussions on how to get Greece back on its feet.

"In order to stabilize the euro, we must not take anything off the table in the short run," he wrote. "That includes as a worst-case scenario an orderly default for Greece, if the necessary instruments for it are available."

Unwelcome in the eurozone?

The comments were echoed by FDP General Secretary Christian Lindner, who told ARD television that "we must consider what happens if the Greeks are not in a position" to get their budget in order.

Philip Rösler
Rösler and the FDP have become more pessimistic in their appraisal of GreeceImage: picture-alliance/dpa

Rösler's commentary represents a significant change in discourse in the German government, as it confronts the difficult reality that Greece's debt problems may be too big for the eurozone to solve. Germany, as the eurozone's biggest economy, has provided the largest share of financing for Greece's emergency loan package.

Horst Seehofer, state premier of Bavaria and leader of the conservative Christian Social Union (CSU), went further than Rösler, saying Greece may need to leave the eurozone all together and reintroduce its previous currency, the drachma.

"If, despite all their efforts, the Greeks do not manage [to control their debt], then you can't rule out this possibility," he told public television ZDF on Sunday.

The executive committee of the CSU, sister party to Chancellor Angela Merkel's Christian Democratic Union (CDU), is expected to approve a motion Monday that calls for highly-indebted states to leave the eurozone.

New taxes and budget cuts in Greece

European policymakers and governments have repeatedly said Greece would never be kicked out of the currency union. Greek Prime Minister George Papandreou has dismissed such a scenario as "not serious."

In its latest attempt to please its debtors and reduce its massive budget deficit, the Greek government introduced a new property tax on Sunday as well as new budget cuts totaling some 2 billion euros ($2.7 billion).

EU Economy Commissioner Olli Rehn praised the measures, saying in a statement that "Greece needs to meet the agreed fiscal targets" set out as conditions for its multibillion-euro emergency loan fund.

"Once Greece meets the conditions, I expect the review by the troika could be concluded by the end of September," he said, referring to the EU, the International Monetary Fund and the European Central Bank.

Author: Andrew Bowen (AFP, Reuters, dpa)
Editor: Martin Kuebler

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