–Adds Comments From Q&A To Story Sent At 17:25 GMT

BERLIN (MNI) – German Finance Minister Wolfgang Schaeuble on
Wednesday suggested that private sector involvement in rescuing Greece
might have to be increased.

“If the Greek debt level is not sustainable in the long run, and a
lot speaks for that it is not, then it has to be reduced,” Schaeuble
said in a speech at an event organized by his center-right Christian
Democratic Union here.

“However, this cannot happen solely to the detriment of tax
payers,” he stressed. “That is why there is no way around to involving
the private sector in a reduction of [Greece's] total debt level.”

At the same time, it has to be assured that all systemic banks have
enough capital “so that there won’t occur a total collapse of the whole
banking system,” the minister said.

If banks cannot get enough capital on the market then the states
have to step in and recapitalise their banks, Schaeuble insisted. In the
case of the highly indebted Eurozone states, the European Financial
Stability Facility (EFSF) has to provide them the means to support their
banks, he added.

The minister once again warned not to try to inflate public debt
away. The crisis cannot be overcome by the means of monetary policy, but
only by budget consolidation and structural reforms, he argued.

Germany had proven that strong economic growth rates are possible
even while conducting a tight fiscal policy. “Germany is the growth
engine of Europe and will remain it,” he said.

Still, “the financial market turmoils are beginning to affect the
real economy,” he acknowledged. “That is why we must restore confidence
swiftly.”

The minister warned that an exit of Greece from the Eurozone would
carry “quite a high risk.” It could lead to a collapse of the global
banking system and a “completely unpredictable economic crisis.”
However, his Greek counterpart had assured him that Greece was not
seeking to leave the Eurozone, Schaeuble said.

The Eurozone debt crisis will be in the focus of the G20 finance
ministers and central bank governors meeting this week, Schaeuble said.

He underlined again the need for further financial market reforms.
If a financial transaction tax cannot be agreed upon on the European
level, Germany might even be ready to introduce it on a national level
first, he said, adding, though, that there is still resistance against
this from the FDP, the junior partner in the coalition government.

–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com

** Market News International **

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