Belfast Telegraph

ECB member admits fears are growing over Greek default risk

By Margaret Canning

A European Central Bank member has admitted Greece might not manage to pay back its public debt.

Klaas Knot is the first eurozone central banker warning outright of the possibility of a Greek default.

Asked by Dutch daily Het Financieele Dagblad about a Greek default, Mr Knot admitted it was ''being studied''.

He said: "It is one of the scenarios. I'm not saying that Greece will not go bankrupt," he was quoted as saying.

"I've long been convinced that bankruptcy is not necessary. The news from Athens, however, is at times not encouraging."

The Dutch central bank head, who entered office this summer in a controversial appointment, continued by saying European partners had worked hard to help Greece, but faulted the country for not understanding the gravity of the situation.

"All efforts are aimed at preventing this, but I am now less certain in excluding a bankruptcy than I was a few months ago," Mr Knot said.

He continued by saying he wonders "whether the Greeks realise how serious the situation is".

Olli Rehn, EU economic and monetary affairs Commissioner, said European leaders will not allow an uncontrolled default of Greek debt and will not let the country leave the eurozone.

But he did not explicitly rule out the possibility of Greece defaulting, which many economists now see as inevitable.

And in a ECB study, co- authored by executive board member Juergen Stark, yesterday warned the entire euro currency project was now in peril.

The ECB announced last week Stark's resignation as a board member.

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