–Adds Comments From Government Adviser To Story Sent At 11:02 GMT

BERLIN (MNI) – The German government said Monday it is currently
not mulling a Greek default and still expects that Greece will be able
to meet the targets necessary to receive the next tranche of fiscal aid.

Government spokesman Steffen Seibert reminded at a regular press
conference here that Germany wants to see the mechanism for an orderly
state insolvency only in 2013, after the European Stability Mechanism
(ESM), the euro area’s permanent bailout fund, is up and running.

These considerations have nothing to do with the current situation
in Greece, Seibert stressed. However, there seems to be some
disagreement within the German government on that point.

Economics Minister Philipp Roesler wrote in an op-ed piece for the
German daily Die Welt, published Monday, that “to stabilize the euro
there must be no taboos even in the short term. If need be, this also
includes an orderly insolvency of Greece, if the necessary instruments
for that are at hand.”

But Seibert noted that the EU treaties rule out the possibility of
a member state leaving the Eurozone or being expelled by its peers.

“Our goal is very clearly and unambiguously to stabilize the
Eurozone as a whole,” the spokesman stressed. “Jointly the 17 [Eurozone
member states] will and must solve their problems and jointly they will
achieve this.”

Seibert said Germany still expects that the Greek government’s
reform efforts will be approved by the troika of officials from the ECB,
EU Commission and IMF later this month. However, if this should not be
the case then the next tranche of fiscal aid cannot be paid to Greece,
he reaffirmed.

Finance ministry spokesman Martin Kreienbaum said at the same press
conference that the troika will likely issue their report on Greece at
the end of the month. “The payment [of the next tranche] is to take
place in October,” he said. “This slightly altered schedule will not
threaten Greek liquidity.”

Seibert also reaffirmed that Germany still opposes the introduction
of eurobonds. “There has been no change to this position at all over
recent days,” he stressed.

Meanwhile, Peter Bofinger, a member of the German government’s
council of independent economic advisers, the so-called five wise men,
warned in a radio interview that an exit of Greece from the Eurozone
would prompt a chain reaction and affect other member states.

In the end, the consequences could be worse than those of the
Lehman bankruptcy, Bofinger told German Deutschlandradio (DLR).

The wise man argued that the consolidation plan for Greece was too
much for the country. “It is simply impossible for a country to save so
much so fast,” he warned. Bofinger advised giving Greece more time in
order to allow the country to stabilise its economy.

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

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