January 4, 2015 / 1:12 PM / in 3 years

Germany's Gabriel says Berlin wants Greece to stay in euro zone

BERLIN (Reuters) - The German government wants Greece to stay in the euro zone and there are no contingency plans to the contrary, Vice Chancellor Sigmar Gabriel said on Sunday, responding to a media report that Berlin believes the currency union could cope without Greece.

German chancellor Angela Merkel talks with Finance Minister Wolfgang Schaeuble prior to a vote on the federal budget, at the lower house of parliament Bundestag in Berlin November 28, 2014. REUTERS/Hannibal Hanschke

Gabriel, the Economy Minister and leader of the center-left Social Democrats (SPD), also told the Hannoversche Allgemeine Zeitung that the euro zone had become more resilient in recent years and could not be “blackmailed”.

“The goal of the German government, the European Union and even the government in Athens itself is to keep Greece in the euro zone,” Gabriel said in the interview to appear on Monday.

“There were no and there are no other plans to the contrary,” he said, and noted the euro zone had become far more stable in recent years.

“That’s why we can’t be blackmailed and why we expect the Greece government, no matter who leads it, to abide by the agreements made with the EU,” he said referring to the Jan. 25 Greek election and possible change of government.

Earlier a spokesman for Chancellor Angela Merkel, Georg Streiter, said the German government expects Greece to stick to the terms of its 240-billion euro EU/IMF bailout agreement.

Streiter declined to comment on a report in Der Spiegel magazine on Saturday that said Berlin had shifted its view and now believed the euro zone would be able to cope with a Greek exit, or “Grexit”, if necessary.

Der Spiegel reported that Berlin considers “Grexit” almost unavoidable if the left-wing Syriza opposition party, narrowly ahead in opinion polls, wins Greece’s election. Syriza wants to cancel austerity measures and a chunk of Greek debt.

But the report said that both Merkel and Finance Minister Wolfgang Schaeuble now believe the euro zone has implemented enough reforms since the height of its debt crisis in 2012 to make a potential Greek exit manageable.

In addition, the euro zone now has an “effective” bailout fund, the European Stability Mechanism (ESM), another source added. Major banks would be protected by the banking union.

As the euro zone’s paymaster, Germany is insisting that Greece must stick to a course of austerity and not backtrack on its bailout commitments - especially as it does not want to open the door for other struggling euro zone members to relax their reform efforts.

Peter Bofinger, on the “wise men” council of economic advisers to the German government, warned against “Grexit”.

“There would be many high risks for the stability of the euro zone with such a step,” he told Welt am Sonntag. “It would let a genie out of the bottle that would be hard to control.”

(This story corrects spelling of “Hannoversche” in second paragraph)

Additional reporting by Gernot Heller; Editing by Gareth Jones and Susan Fenton

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