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article imageEU should prepare for Greece default, German official says

By Nathan Salant     Jun 16, 2015 in World
Berlin - European Union nations should prepare for Greece's expected default and departure from the common currency, a German official said Monday.
Germany's EU commissioner, Guenther Oettinger, said the failure of last-ditch talks to help resolve Greece's financial crisis over the weekend means it's time to plan for the reality of that country's exit from the monetary union (the so-called "Grexit").
"We should work out an emergency plan because Greece would fall into a state of emergency," Oettinger said.
"Energy supplies, pay for police officials, medical supplies, and pharmaceutical products and much more" had to be guaranteed to avoid national collapse, he said.
Oettinger said weekend negotiations to keep Greece in the common currency, the Euro, failed because Greece's new prime minister, Alexis Tsipiras, would not agree to austerity terms spelled out by lenders as a condition of receiving additional aid worth billions of dollars, according to the Reuters news service.
Athens has two weeks before it must pay $1.6 billion to the International Monetary Fund, a payment that potentially would wipe out its cash reserves and leave it unable to borrow.
But Tsipiras, a leftist leader who took office in January following his Syriza party's surprise win in general elections on an anti-austerity platform, blamed banks and "political expediency" for the collapse of negotiations and ruled out any further cuts to pensions.
"We will await patiently until the institutions accede to realism," Tsipras told Greek newspaper Efimerida ton Syntakton, Reuters said.
"We do not have the right to bury European democracy at the place where it was born," Tsipiras said.
But the impasse appears to be impacting the value of shares in European companies and the Euro itself.
Greek stocks fell 6 percent over the weekend, and bank stocks fell by as much as 12 percent, while interest rates on government bonds soared.
Tsipras and his negotiating team planned to meet Monday to plan strategy ahead of Thursday's scheduled session with eurozone finance ministers.
But IMF chief economist Olivier Blanchard said Greece should stop protecting pensions because it needed to find more ways to cut its budget.
"Just as there is a limit to what Greece can do, there is a limit to how much financing and debt relief official creditors are willing and realistically able to provide given that they have their own taxpayers to consider," he said.
"Time is running out for Greece," said Jens Weidmann, head of Germany's central bank.
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