FRANKFURT (MNI) – Germany’s participation in an aid program for
Greece is acceptable, given the serious risk of contagion to other
Eurozone states, European Central Bank Governing Council member Axel
Weber said Wednesday.
A Greek default would be a risk to the stability of the financial
system, the Bundesbank president explained in prepared remarks to the
German parliament’s Budget Committee.
Greece’s default “would constitute a considerable risk for the
stability of the currency union and the financial system in the current
very fragile state,” Weber said.
Weber remarked that “grave contagion effects for other [EMU] member
states” and self-reinforcing feed-back effects threaten capital markets.
Even an aid package to Greece that is “under comprehensive and
strict conditions” is a “tightrope walk” that is not without dangers in
its implementation, he commented.
Nevertheless, “all in all, Germany’s participation in the aid
package for Greece is acceptable,” he judged.
Greece’s habit of living beyond its means and implementing a
budgetary policy that was not in line with the stability requirements of
a currency union, along with the country’s structural problems, has
resulted in a situation from which “Greece can no longer free itself
under its own strength,” Weber said.
Indeed, its ability to obtain financing on the capital market is
“acutely” endangered, Weber observed.
–Frankfurt bureau; +49-69-720142; frankfurt@marketnews.com
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