A finance ministry draft shows that Berlin is preparing a fresh bail-out to stabilise the Greek economy and stem EMU-wide contagion after a return to the drachma, should the country reject EU austerity demands.
The funds would come from Europe’s rescue machinery but costs would be shared among all 27 EU members – not just the eurozone – on the grounds that Greece has a right to Brussels crisis funds, like any other member state with its own currency.
The scheme aims to contain fallout from a Greek exit and “limit the losses of the European Central Bank” on the country’s bonds.
The plan, leaked to Germany’s Der Speigel newspaper, was disclosed as markets braced themselves for another week of drama, with fears of an EMU break-up and a banking crisis in Spain infecting confidence across the world.
Romano Prodi, the former EU Commission chief, said those threatening to eject Greece were playing with fire. “Exit would bring down the whole house of cards, with one state falling after another: it would reach Portugal, Spain, then Italy and France,” he said.