Berlin expects Greece to stay in euro, as 'Grexit' debate resurfaces

BRUSSELS - Berlin has said it expects Greece to remain in the eurozone despite a news report suggesting that chancellor Angela Merkel i believes the single currency could withstand a Greek exit.

Talk about a so-called 'Grexit' resurfaced Sunday (4 January) following a report by Der Spiegel, citing sources close to the German government, that Berlin believes an exit is "almost inevitable" if the radical left Syriza wins the forthcoming Greek elections and stops paying the country's debts.

Der Spiegel suggested that both Merkel and her finance minister Wolfgang Schaeuble believe that a Greek exit would be manageable as the eurozone has made so many reforms since the heights of the crisis in 2012.

The report has caused widespread debate in Germany, with several newspapers seeing it as a politically risky attempt to influence the Greek elections.

The whole discussion has surfaced once more because of Greece's snap general election on 25 January, which looks set to be won by Syriza.

The latest poll, for the Eleftheros Typos newspaper, gives Syriza 30.4 percent against 27.3 percent for centre-right New Democracy party.

Over the weekend Syriza leader Alexis Tsipras said that a victory by his party would start the "necessary chance" in Europe. "We must finish with austerity," he added.

At the end of last week, he said that Greece's debt is unsustainable and needs to be restructured.

Berlin on Sunday indicated that it believed that Athens would continue to meet the demands of its international creditors - the EU commission, the European Central Bank and International Monetary Fund - even after a Syriza win.

"Greece has fulfilled its obligations in the past. The federal government is assuming that Greece will continue to meet its obligations," said Georg Streiter, a government spokesperson.

Meanwhile economy minister Sigmar Gabriel said Berlin wants Greece to stay in the eurozone.

"The goal of the German government, the European Union and even the government in Athens itself is to keep Greece in the eurozone. There were no and there are no other plans to the contrary," he told the Hanoversche Allgemeine Zeitung.

But he also said that Berlin expected Athens to stick to its reform programme, noting that the eurozone has become more stable in recent years so it cannot be "blackmailed".

The war of words has been brewing for several weeks as it became clear throughout December that Greece would likely head to early elections and possibly bring Syriza to power.

In Greece the debate has focussed on the country's high unemployment, a GDP that has shrunk by almost 20 percent since 2010, and a massive debt burden while in Germany some politicians are questioning whether it makes sense to continue to financially assist Athens.

But while the word 'Grexit' might be in the air again, there are some cautioning against being too sanguine about it.

"There would be many high risks for the stability of the eurozone with such a step," Peter Bofinger, from the council of economic advisers to the German government, told Welt am Sonntag.

"It would let a genie out of the bottle that would be hard to control."