BERLIN — Contagion from the Greek debt crisis could spread to at least five other countries if it is not cautiously managed, a key European leader warned Saturday.
Jean-Claude Juncker, prime minister of Luxembourg and chairman of the European group of 17 finance ministers, told the German daily Sueddeutsche Zeitung that demanding that private creditors contribute to the next Greek bailout package could be considered a “default” by ratings agencies, with extreme consequences for Europe as a whole.
Juncker was quoted as saying that a Greek bankruptcy “could prove contagious for Portugal and Ireland, and then also for Belgium and Italy because of their high debt burden, even before Spain.”
“We are playing with the fire,” he told the paper.
He spoke a day after Moody’s warned it might reduce Italy’s Aa2 credit rating over concerns about the country’s ability to increase growth and reduce its public debt, one of the highest in Europe. The warning followed a similar move by Standard and Poor’s, which cut its outlook for Italy’s debt from stable to negative.
On Friday, German Chancellor Angela Merkel softened her government’s insistence on having private creditors share part of the Greek burden after a meeting with French President Nicolas Sarkozy in Berlin, as they agreed that the participation should be “voluntary.”
Ratings agencies and the European Central Bank have said forcing bond holders to accept losses or give Greece extra years to repay its debt likely would be considered a partial default that could spread panic on financial markets.
