NPR : News

Filed Under:

Potential Greek Default Worries European Politicians

Deepening concerns that debt-troubled Greece may default — and increasingly strident comments by several politicians in Germany about that possibility — helped send European markets sharply lower on Monday, raising worries about the sector's health.

The Stoxx 50 index of blue-chip European shares dropped 2.6 percent, with many of the continent's leading financial groups, such as Deutsche Bank and BNP Paribas, at one point falling as much as 11 percent on worries over their exposure to potentially bad European debt.

Senior German politicians ratcheted up tough, almost threatening, rhetoric over the Greek crisis, raising possibilities once thought to be taboo.

Christian Lindner, the general secretary of the Free Democratic Party, the junior coalition partner in Germany, told ZDF TV that if Greece maintains its strict austerity measures, the country would continue to get European bailout money. But, he added, Greece may decide to leave or be pushed out of the 17-member currency bloc.

"If the Greeks are unable or unwilling to see through their austerity measures, then state insolvency or indeed leaving the eurozone cannot be ruled out," Lindner said.

Over the weekend, Free Democratic Party leader Philipp Roesler, who is also Germany's economy minister, said that to stabilize the eurozone, "an orderly bankruptcy of Greece" might be necessary. He also said there should be "no bans on thinking" in resolving the euro crisis. "I include in that, in perspective, an orderly insolvency if ... the necessary instruments are available."

Even some members of parliament in Chancellor Angela Merkel's own party — the Christian Democratic Union — were taking an increasingly tough line.

The strong words are, in part, meant as pressure. But they also reflect deep concerns in Germany that Greece may eventually undergo a full or partial default, and that a second bailout of Greece, which is under way, will prove inadequate to stem the crisis.

Merkel's spokesman, Steffen Seibert, said Germany is "confident that Greece will be in a position to continue consistently along the road on which it has embarked." He noted that current treaties don't foresee either a voluntary exit or expulsion of any country from the eurozone.

"Our clear aim is to stabilize the eurozone as a whole, in its entirety," Seibert said.

Defaults On The Horizon

On Monday, traders bought up insurance against a default on Greece's government bonds, suggesting they believe a bankruptcy will happen at some point.

Juergen Michels, chief eurozone economist at Citigroup, says the size of the European rescue fund will very likely have to be increased. He says talk of eurozone defaults in the next year or so is simply realistic.

"We'll probably also have to see defaults," Michels says. "Greece, at the end of the day, is likely to have one, and it's also likely to happen for Portugal and Ireland."

Michels says such a default would be a massive financial shock, but adds that preparing for it now will lessen the blow.

Professor Hans-Werner Sinn, president of Germany's Center for Economic Studies at the University of Munich, told reporters in Berlin on Monday that if it is done in an orderly way, bankruptcy for Greece may be the only way for Europe to start to move out from under the debt crisis.

"Insolvency does not mean complete ruin and demise. Insolvency allows the off-loading of debts, a fresh start, a liberation," Sinn said. "But debts are not Greece's only problem. The other major problem is a lack of competitiveness within the Greek economy."

Sinn also said that Greece has been effectively bankrupt since last year's bailout, and that their insolvency has simply been deferred by a series of ineffective European political measures.

With reporting from NPR's Eric Westervelt. This story contains material from The Associated Press.

Copyright 2011 National Public Radio. To see more, visit


Credibility Concerns Overshadow Release Of Gay Talese's New Book

NPR's Kelly McEvers speaks with Paul Farhi of the Washington Post about Gay Talese's new book, The Voyeur's Hotel. The credibility of the book, which follows a self-proclaimed sex researcher who bought a hotel to spy on his guests through ventilator windows, has been called into question after Farhi uncovered problems with Talese's story.

Amid Craft Brewery Boom, Some Worry About A Bubble — But Most Just Fear Foam

Fueled by customers' unquenchable thirst for the next great flavor note, the craft beer industry has exploded like a poorly fermented bottle of home brew.

White House Documents Number Of Civilians Killed In U.S. Drone Strikes

The Obama administration issued a long awaited report Friday, documenting the number on civilians who have been accidentally killed by U.S. drone strikes. Human rights activists welcome the administration's newfound transparency, though some question whether the report goes far enough.

Tesla 'Autopilot' Crash Raises Concerns About Self-Driving Cars

The National Highway Traffic Safety Administration is investigating a fatal crash involving a Tesla car using the "autopilot" feature. NPR's Robert Siegel talks to Alex Davies of Wired about the crash and what it means for self-driving car technology.

Leave a Comment

Help keep the conversation civil. Please refer to our Terms of Use and Code of Conduct before posting your comments.