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Germany 'prepared to let Greece drop euro'

January 4, 2015

A German report says Chancellor Angela Merkel is prepared to let Greece quit the eurozone should the people elect a government that abandons austerity. Berlin is increasingly convinced a "Grexit" would be bearable.

Griechenland Protest Demonstration Sparmaßnahmen Generalstreik 01.05.2013 Symbolbild EU Europa
Image: AFP/Getty Images

The German government is prepared to countenance a Greek exit from the eurozone, should it prove necessary, according to a report from German news magazine Der Spiegel.

The magazine reported in its online edition on Saturday that Chancellor Angela Merkel and Finance Minister Wolfgang Schäuble believe that such a development would now prove bearable for the rest of the currency bloc. The report cited progress made in the eurozone since 2012, when the eurozone sovereign debt crisis was said to have been at its worst, with fears diminishing that a "Grexit" could cause the currency union to disintegrate.

"The danger of contagion is limited because Portugal and Ireland are considered rehabilitated," Der Spiegel quoted a government source as saying.

In addition, the European Stability Mechanism (ESM), the eurozone's bailout fund, was now seen as an effective and available rescue mechanism. Major banks would be protected by the banking union.

Alexis Tsipras 29. Dez. 2014
Polls predict that leftist opposition candidate Tsipras could emerge as the winner of the upcoming electionImage: Reuters/A. Konstantinidis

Any such policy shift has yet to be confirmed by the German government, with Berlin previously having been keen to keep Greece within the bloc.

European shares and certain eurozone bonds fell in value last week after the Greek parliament rejected Prime Minister Antonis Samaras' presidential candidate. That set a course for the country to stage a general election which could see the opposition party Syriza achieve victory, as polls predict. The election is set to take place on January 25.

Syriza's leader Alexis Tsipras has vowed to reverse the reforms insisted upon by Greece's international creditors, which include the EU and International Monetary Fund.

New polls, new party

A poll published on Saturday showed that Syriza led the ruling Samaras' conservative New Democracy with 30.4 percent of the vote compared with 27.3 percent. The socialist PASOK party, the junior member of a coalition with new Democracy, polled just 3.5 percent of the vote.

Former Greek Prime Minister George Papandreou officially formed his new party Saturday, further complicating the pre-election battleground.

Papandreou, who was PASOK's premier from 2009 to 2011, said the new Movement of Democrat Socialists would work after the election "to definitively bring Greece out of the crisis."

rc/bk (AFP, dpa, Reuters)