German Chancellor Ms Angela Merkel has rejected calls for the “orderly insolvency” of debt-stricken Greece she tried to calm financial markets and defuse a crisis that threatens to tear apart her Centre-Right coalition government.
Resolving the crisis will require a “very long and step-by-step process” involving budget restructuring, restoring confidence in financial markets, improving competitiveness and other measures, she said on Tuesday after a meeting with Finland Prime Minister Mr Jyrki Katainen in Berlin.
She was referring to demands by some of her coalition partners, especially Mr Philipp Roesler, Minister for Economic Affairs and Chairman of the Free Democratic Party, who proposed that Greece needed an “orderly insolvency” and said forcing the country out of the euro zone should be considered as the last step to protect the rest of the 17-nation group.
His comments unleashed a massive sell-off of shares and stock market indices plunged across Europe on Monday, but they recouped most of their losses on Tuesday.
Without mentioning Mr Roesler, the chancellor urged her coalition partners to exercise great caution in voicing their views on Greece and to be aware of the consequences of their actions. “Otherwise, they will be putting the euro zone in a grave situation,” she said.
She said in a radio interview earlier that an uncontrolled bankruptcy of Greece, which could have a domino effect on other countries, must be prevented at any cost.
Therefore, everybody must be very careful in their choice of words. “What we don’t want is further turbulence in the financial markets,” she said.