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Greece Should Be Ready to Quit Euro, Lawmaker Says

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April 22 (Bloomberg) -- Greece should be prepared to leave the euro region if it fails to fix its finances, a German lawmaker from the governing coalition said.

“If Greece can’t push through these savings measures, it must voluntarily leave the eurozone,” Frank Schaeffler, deputy finance spokesman for the Free Democratic Party, Chancellor Angela Merkel’s junior coalition partner, said by phone in Berlin today.

The Greek government needs to step up its deficit-cutting measures “significantly,” said Schaeffler. Leaving the euro would allow Greece to devalue its currency and help improve the country’s competitiveness in the short term, he said. His comments were previously reported in Handelsblatt.

Schaeffler, who last month called on the Greek government to sell some islands to reduce its debt, has previously said that Greece swindled its way into the euro. His comments reflect a German backlash against helping bail out Greece that spread last week as economists, business leaders and politicians questioned Germany’s 8.4 billion-euro ($11.2 billion) contribution to a 45 billion-euro EU and International Monetary Fund aid plan.

Bundesbank President Axel Weber told German lawmakers on April 19 that Greece may need even more aid as the government in Athens struggles to convince the Greek population of the need to push through planned spending cuts, according to two people who attended the closed-doors briefing.

Default Prevention

Greece’s default on its debt “must be prevented” because it would break up the European currency union and trigger another banking crisis, another two lawmakers from the governing coalition said in a separate e-mailed statement.

“A sovereign default by a country such as Greece might set off the slide into a deep credibility and financial crisis,” Georg Nuesslein and Thomas Silberhorn of the Bavaria-based Christian Social Union, said in the statement.

The euro area would break up and other highly indebted countries would find it harder to raise capital, they said. “This must be prevented,” the lawmakers said. Still, “aid for Greece must not be a free ride” and the country’s budget must come under international “surveillance,” they said.

Nuesslein is the CSU’s economic spokesman in the German parliament in Berlin and Silberhorn is its European affairs spokesman. The CSU is the Bavarian sister party of Merkel’s Christian Democratic Union.

EU aid for Greece as a last resort would be legally sound and needed to defend the euro, Finance Minister Wolfgang Schaeuble told German lawmakers yesterday. “The default of one country in the currency union would throw the stability of the entire euro zone into question,” he said.

To contact the reporters on this story: Brian Parkin in Berlin at bparkin@bloomberg.net; Tony Czuczka at aczuczka@bloomberg.net

To contact the editors responsible for this story: James Hertling at jhertling@bloomberg.net

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