Europe looks for contingency plan B

Financial Times
June 27, 2011

European officials have begun debating contingency plans in case the Greek parliament fails to approve a €28bn austerity package, which will be voted on after a three-day debate that began on Monday.

The austerity measures have been agreed with international lenders as a condition of a July €12bn aid payment which Athens needs to avoid a sovereign default next month.

But according to people briefed on the talks, contingency plans are being urged by Germany, which is concerned that a failure in Athens could endanger the single currency and spread contagion throughout Europe’s financial system.

A senior European official involved in the Greece talks said no “plan B” had been discussed on a European level, however, and the Greek aid officially remained reliant on Athens passing the austerity measures. But the official acknowledged that Germany had been urging such a move.

“It is their plan [and has not] been discussed at eurogroup [meeting of EU finance ministers],” the official said. “Our message to the Greeks is there is no plan B, and there is not.”

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