The German government has been making preparations for the unlikely event that Greece defaults even though it does not expect such an event, Finance Minister Wolfgang Schaeuble said in an interview in Der Spiegel.
Reiterating comments made last week, Schaeuble also told Der Spiegel news magazine that the government would take steps to ensure that any contagion in the financial system in such an event would be quickly contained.
As a responsible government we're making provisions for the unlikely event -- and something that would be in contrast to all expectations -- that Greece defaults, Schaeuble told the news magazine, due to be published on Sunday.
We would then make sure that it doesn't lead to an uncontrolled development, he added. Schaeuble said that if Greece were to become insolvent, it could lead to awesome repercussions for banks, the economy and possibly the entire financial system as a whole.
Schaeuble also defended an agreement with Germany's top financial institutions to contribute 3.2 billion euros to a fresh Greek rescue. On Thursday, Schaeuble said the banks and insurers involved in the deal had agreed to roll over at least their Greek debt holdings that mature by 2014.
Naturally that's a success, he told Der Spiegel. A few months ago no one seriously believed that we would get any sort of private involvement at all.
Schaeuble admitted that he had to make concessions to the German financial institutions.
The German banks and insurance companies made it very clear to me that it could not happen that their participation would leave them at a competitive disadvantage to their European counter-parts, he said.
Euro zone finance ministers are expected to approve the next tranche of emergency aid for Greece on Saturday and take decisions on a second three-year financing plan for Athens on July 11, euro zone officials have said.
The release of the 12 billion euro ($17 billion) tranche from the euro zone and the International Monetary Fund was made possible after Greece passed new austerity and reform laws this week, removing the threat of a near-term default.
Finance ministers from the 17 countries using the euro and the President of the European Central Bank Jean-Claude Trichet are likely to discuss in a conference call on Saturday how much of the 80-90 billion euros could come from the private sector.
(Reporting by Erik Kirschbaum; Editing by Hugh Lawson)