Greek euro exit would be 'manageable'

The impact of a Greek exit from the euro zone would be substantial but "manageable", Germany's Bundesbank said today, raising pressure on Athens to keep its painful economic reforms on track.

In a toughly worded monthly report, the German central bank also said euro zone member states should have a say on further payments of aid to Greece under its €130 billion bailout programme funded by the IMF and the European Union.

"Greece is threatening not to implement the reform and consolidation measures that were agreed in return for the large-scale aid programmes," the Bundesbank said.

"This jeopardises the continued provision of assistance. Greece would have to bear the consequences of such a scenario. The challenges this would create for the euro area and for Germany would be considerable but manageable given prudent crisis management."

Echoing German political leaders, the Bundesbank warned against Europe easing the conditions for Greece to access aid.

"A significant dilution of existing agreements would damage confidence in all euro area agreements and treaties and strongly weaken incentives for national reform," it said.

Greece holds a second election on June 17th after a previous poll produced a parliament split between supporters and opponents of the bailout programme, which requires Athens to make deep spending cuts and hike taxes.

Anti-bailout parties are expected to repeat their strong performance, opinion polls show, increasing the risk that Greece will renege on its austerity pledges, default on its debt and possibly leave the single currency.

Reuters