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EU leaders developing Plan B in case of Greek default

German finance minister says EU is preparing for the worst in case Greece fails to pass its austerity plan and can’t pay its bills next month.

Image: Julien Behal/PA Wire

AS THE GREEK government faces a crucial vote this week on its controversial and highly unpopular €28bn austerity package, other European leaders are preparing back-up plans in case of a Greek debt default.

Athens must pass the package before accessing the next €12bn batch of its current bailout package – and before a second bailout can be finalised. Greece badly needs that €12bn to make its loan repayments next month.

The Financial Times Deutschland reports that Germany’s finance minister Wolfgang Schäuble said in an interview with a German newspaper that the EU is preparing for the worst, in case the Greek parliament rejects the austerity plan and ends up defaulting on its debt.

Schäuble said that the EU needs to ensure that “the infection risk for the financial system” resulting from a Greek default would be contained.

Greek Prime Minister Papandreou has already suggested that a second bailout, which EU leaders recently agreed is required, will reach in or around the amount of its current €110bn package.

Britain’s prime minister David Cameron has vowed to oppose any use of British taxpayer funds in another Greek bailout and has apparently secured the support of Germany’s  Angela Merkel on the issue. Today, French President Nicolas Sarkozy said French banks are prepared to support Greece by allowing a significant debt rollover.

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Sarkozy’s announcement could encourage other banks to pitch in and help avoid a Greek default.

- Additional reporting by the AP

Read more: Greek government wins confidence motion, but will tough austerity plan pass? >

Read more: Ireland faces €200m hit if Greek economy crumbles >

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