As Greece’s fiscal woes turn viral and infect markets across the European Union, pressure is mounting on Germany to support a new rescue deal.
Axel Weber, the head of the Bundesbank, joined ECB and IMF calls for a quick solution.
The euro is at a one-year low against the dollar and the cost of borrowing is inching up for governments in Athens, Madrid and Lisbon.
Germany, the EU’s largest economy, has been lukewarm towards a Greek bailout amid stiff public opposition.
But leading economists warn resolute action is needed to stabilise the single currency — the price of failure could be much higher.
Falko Fecht, a professor of economics at the European Business School, said that if Berlin refuses to help “then Greece will inevitably head towards insolvency.”
“This is not the right way to go about things because the German banking system would suffer such huge losses that the taxpayer would, at the end of the day, find themselves having to pay so much more,” Fecht added.
Greece’s public finances are in ruins. Its public deficit equates to 13.6 percent of its GDP.
The government is currently negotiating a a long-term aid package with the EU and the IMF, believed to be worth some 135 billion euros.