BERLIN (Reuters) - A Greek default would have unforeseeable consequences and cause the euro zone crisis to spread, European Commission President Jose Manuel Barroso was quoted as saying in mass-selling Bild daily.
Talks are continuing over a vital aid tranche for debt-stricken Athens, which could run out of cash as soon as mid-November, dragging the euro zone deeper into a debt crisis already shaking financial markets worldwide.
“If we give up on Greece, there is a big danger that the crisis will spread to other countries,” Barroso told Bild in an interview to be published on Monday, echoing comments of German Chancellor Angela Merkel.
Merkel warned last week the threat of contagion from a euro zone state rescheduling its debt would be huge and only made sense once it had achieved a primary surplus.
Barroso noted the euro zone had no experience with the possible bankruptcy of a member state.
“This is new territory for us and we are discussing solutions which have not really been tested before,” he said.
But the European Union was convinced that a Greek bankruptcy was “not cheaper for all participants than the current aid schemes,” he said.
European finance ministers are considering making banks take bigger losses on Greek debt — an issue that could be discussed at a meeting between Merkel and French President Nicolas Sarkozy later on Sunday.
It is still uncertain whether Greece, which was hit by strikes and riots over austerity measures last week, will receive the next tranche of aid given doubts over its willingness to reform.
“The reforms must be faster, otherwise Greece will lose its credibility,” said Barroso.
Barroso added that Europe needed to correct the “orgy of consumption” that had taken place in some countries due to the introduction of a strong common currency with low interest rates.
Merkel meets with Sarkozy on Sunday to thrash out differences over how to use the euro zone’s financial firepower to counter the debt crisis, which is threatening to spiral into financial meltdown as the value of banks’ sovereign debt holdings slide.
Reporting By Sarah Marsh; Editing by Hans-Juergen Peters