Minister for Finance Michael Noonan said today he wants to see Greece remain in the euro region for the sake of stability.

"I would like Greece to stay in the euro," he told reporters in Brussels today ahead of a meeting of euro zone finance ministers. "It's very important that the euro zone stays intact and that the many countries that want to join the euro will have the stabilisation that's necessary when they want to join."

However, he said Greece has yet to set its house in order. "I would like to see Greece staying in the euro and strengthening its economy," he said.

Greece's possible exit from the euro area has now moved to the centre of Europe's financial-crisis debate, rattling markets as authorities in Athens struggled to form a government.

The country is likely to face new elections in June after three failed attempts to form a government that would support the terms of an EU-IMF bailout following a poll earlier this month. Opinion polls show most Greeks want to stay in the euro zone, but oppose the harsh austerity imposed by the terms of the bailout programme.

German chancellor Angela Merkel said today Greece will "always" stay a member of the European Union and would be better off remaining in the euro.

"I believe it's better for the Greeks to stay in the euro area, but that also requires that we set out a path on which Greece gets back on its feet step by step," Dr Merkel said during a panel discussion with secondary school students in Berlin today. "Of course Greece can make it."

Earlier, the European Commission said it hopes Greece will remain part of the euro zone but Athens must respect its obligations. "We don't want Greece to leave the euro, quite the contrary - we are doing our utmost to support Greece," European Commission spokeswoman Pia Ahrenkilde Hansen told a regular news briefing.

"We wish Greece will remain in the euro and we hope Greece will remain in the euro ... but it must respect its commitments," Ms Ahrenkilde Hansen said."The commission position remains completely unchanged: we want Greece to be able to stay in the euro. This is the best thing for Greece, for the Greek people and for Europe as a whole."

Ms Ahrenkilde Hansen declined to speculate what might happen if Greece were unable to form a government that supported the terms of its €130 billion bailout.

Leftist Syriza leader Alexis Tsipras, whose party came second in the Greek election but is now leading in opinion polls, has said he wants Greece to stick with the single currency but scrap the bailout programme.

Germany has appealed to Greeks to build a viable government, but acknowledged that the country was in a difficult situatioe, while Finland's European affairs minister Alexander Stubb said Greece could not stay in the euro zone if it were to tear up its bailout deal. "I think that is an impossible equation," Mr Stubb said.

Mr Noonan said the euro finance ministers will also discuss the situation in Spain, where the government last week made a fourth attempt to clean up banks.

Getting Dr Merkel to weaken her demand that debt cutting be the core of the crisis response will be a key objective of new French president Francois Hollande when the two meet tomorrow in Berlin.

A Greek departure from the euro area could trigger a default-inducing surge in bond yields, capital flight that might spread to other indebted states and a resultant series of bank runs. Although Greece accounts for 2 per cent of the euro-area's economic output, its exit would fragment a system of monetary union designed to be irreversible and might cause investors to raise the threat of withdrawal by other states.

European Union economic and monetary commissioner Olli Rehn said in Tallinn that the region is "certainly more resilient" to a possible Greek exit than it was two years ago, when the region would have been "massively" underprepared.

"I still believe that Greece can stay in the euro and find the way to make sure that it respects its commitments," Mr Rehn said. "It would be much worse for Greece and Greek citizens, especially for the less well-off Greek citizens, if Greece did leave the euro than for Europe as such. Europe also would suffer, but Greece would suffer more."

Agencies