Eurozone ‘could cope’ with exit of Greece

The German government believes that the eurozone would now be able to cope with a Greek exit if that proved necessary, the Der Spiegel news magazine reported.

Chancellor Angela Merkel and Wolfgang Schaeuble, the finance minister, believe the eurozone has implemented enough reforms since the height of the regional crisis in 2012 to make a potential exit by Greece manageable, Der Spiegel reported.

“The danger of contagion is limited because Portugal and Ireland are considered rehabilitated,” the weekly magazine quoted one government source as saying.

In addition, the European Stability Mechanism, the eurozone’s bailout fund, is an “effective” rescue mechanism and was now available, another source added.

Major banks would be protected by the banking union. The German government in Berlin could not be reached for comment.

It is still unclear how a eurozone member country could leave the euro and still remain in the European Union, but Der Spiegel quoted a “high-ranking currency expert” as saying that “resourceful lawyers” would be able to clarify.

According to the report, the German government considers a Greek exit almost unavoidable if the leftwing Syriza opposition party led by Alexis Tsipras wins an election set for January 25.

The Greek election was called after lawmakers failed to elect a president last month. It pits prime minister Antonis Samaras’ conservative New Democracy party, which imposed unpopular budget cuts under Greece’s bailout deal, against Tsipras’ Syriza, who want to cancel austerity measures and a chunk of Greek debt.

Polls show Syriza is holding a lead over New Democracy, but its margin has narrowed to about three percentage points.

(Reuters)