Monday, September 12, 2011

German minister raises ‘orderly default’ for Greece

Germany has stepped up its rhetoric against Greece, warning that the debt-laden country could default on its debts in a move that highlights the growing divisions at the heart of Europe.

Philipp Roesler, Germany’s economy minister, said an “orderly default” for Greece could no longer be ruled out and branded the country’s deficit-reduction measures “insufficient”.

The warning is likely to spook financial markets further and comes despite Greece yesterday announcing a fresh €2bn (£1.7bn) of budget cuts and the introduction of a country-wide real estate tax.

Evangelos Venizelos, the finance minister, said the cuts and tax measure were necessary to allow Greece to meet obligations demanded by the European Union and IMF in exchange for bail-out funds.

Writing in the Die Welt newspaper, Mr Roesler said: “To stabilise the euro, we must not take anything off the table in the short run. That includes as a worst-case scenario an orderly default for Greece if the necessary instruments for it are available.”

He said such a default would mean “re-establishing the affected state’s ability to function, perhaps with a temporary restriction of its sovereign rights”. more