Merkel partners call for Greek euro exit

Angela Merkel's coalition partners are lining up to demand a Greek exit from the euro, ratcheting up pressure on the German chancellor and fanning market fears that Greece could shortly be jettisoned from the single currency bloc.

Patrick Doering, general secretary of Merkel's junior coalition partners the Free Democrats (FDP), told the regional Passauer Neue Presse newspaper that Greece could recover and regain competitiveness more quickly outside the euro zone.

"If Greece was no longer a part of the euro zone it could create trust on markets,» he said in remarks published on Tuesday.

He is the latest of a number of top-ranking members of the two smaller parties in Merkel's coalition to call for an exit for the benefit of Greece and to prevent contagion, mindful of the rising cost to Germany of bailing out weaker euro zone states.

Rating agency Moody's acknowledged that burden late on Monday, cutting its outlook on German debt to negative from stable.

FDP leader Philipp Roesler, who is also Germany's Vice Chancellor and Economy Minister, told television over the weekend a Greek exit was no longer a taboo for experts, or his party. «It has lost its fear factor,» he said.

He told broadcaster ARD that he was more than sceptical on whether Greece could meet the terms of its aid package. Faced with insolvency Greeks would decide themselves to leave the single currency, he said.

Inspectors from the international 'troika', the European Commission, European Central Bank and International Monetary Fund, arrive in Athens on Tuesday to focus on some 11.7 billion euros of spending cuts Greece needs to make in 2013 and 2014.

The country's five-year recession may be worsen to deeper than 7 percent this year, Prime Minister Antonis Samaras said on Tuesday, further complicating its efforts to hit the tough budget targets.

The FDP slumped dramatically in opinion polls over the last year but recently has seen some recovery to around 4-5 percent of the vote. It still has 93 seats in the 620-seat Bundestag, or lower parliamentary house, giving it a significant voice on euro zone policy.

Alexander Dobrindt, general secretary of the more influential Christian Social Union (CSU) - the Bavaria-based sister party of Merkel's Christian Democrats (CDU) - on Monday urged Greece to start paying half of its pensions and state salaries in drachmas as part of a gradual exit.

Roesler's comments were condemned as reckless by European Parliament FDP lawmaker Jorgo Chatzimarkakis, who is a German of Greek descent.

"(Roesler's) wording was wrong-headed, he gave the thumbs-down before the troika even arrived in Athens,» he told Deutschlandfunk radio in an interview.

"Germany is highly dependent on developments with the euro and we need it as a stable currency anchor. When we send markets on a downward spiral with comments such as these it is reckless."

Germany's finance ministry on Monday urged people to wait for the results of the troika mission, a stance echoed by Austrian Finance Minister Maria Fekter.

Greece wants two more years to achieve its bailout goals but its lenders have opposed the idea because it would imply even more financial aid.  

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