April 27, 2010 / 8:46 AM / 9 years ago

German FDP: Temporary Greek euro exit an option

BERLIN (Reuters) - Greece might have to quit the euro zone for a time if the country failed to tighten its belt sufficiently to qualify for emergency aid, a budget expert with Germany’s junior coalition party said on Tuesday.

A temporary exit from the single currency might benefit Athens if accompanied by a devaluation, the Free Democrats’ (FDP) Juergen Koppelin told Deutschlandfunk radio.

The EU treaty makes no provision for a euro zone member to quit the single currency, and top regional policymakers including ECB president Jean-Claude Trichet and Eurogroup chairman Jean-Claude Juncker have dismissed the possibility of Greece doing so.

Greece is poised to become the first euro zone country to be bailed out because of weak finances, having asked the IMF and European Union for up to 45 billion euros, but with Athens’ financing costs still rising, investors have begun to wonder if that is enough to avert a default.

“One may have to say no (to aid) if Greece does not meet conditions and the country just comes along to get money under more favorable terms from the euro zone than from banks,” Koppelin said.

Asked whether a German “no” meant that Greece would no longer get any money, Koppelin said: “That can’t be ruled out, right up to the point where Greece would have to leave the euro zone for a time.

“This is not (monetary union) breaking up. The Greek currency could be depreciated. That could even help them with exports.” Koppelin gave no further details of how a Greek exit from the euro or a devaluation might be structured.

The pro-business FDP is the junior partner in the center-right coalition of Chancellor Angela Merkel, who on Monday said Greece would have to commit to further savings measures and show it could return to a sustainable economic path before Germany approved aid.

Merkel also said Germany would be ready to take a decision on granting aid to Greece in a matter of days, once the IMF and European officials have completed talks with Athens.

Separately, Hermann Otto Solms, a senior FDP finance expert, told business daily Handelsblatt on Tuesday he believed “the government in Athens would not be able to pay off part of its debts.”

“That will only take effect in a few years...” he added.

Polls show an overwhelming majority of Germans oppose providing Greece aid, a view that has been reinforced by powerful sections of the media.

Tuesday’s edition of mass-selling daily Bild ran a headline: “Why are we paying for the Greeks’ luxury pensions?”

Regional elections that will determine whether Merkel’s alliance retains control of the country’s upper parliamentary house take place on May 9.

Writing by Dave Graham; editing by John Stonestreet

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