After the announcement of new austerity measures by the Greek government yesterday to meet this and next years targeted budget deficit and become eligible for receiving the coming bailout installment, German Chancellor Angela Merkel welcomed the steps taken by the Greek government.

Merkel referred that euro area system does not allow for orderly insolvency to any member where it will be allowed after the establishment of the European Stability Mechanism in 2013, referring indirectly that Greece will not be allowed to default before 2013.

She added that uncontrolled insolvency would not only affect Greece but also other euro area nations as the contagion will spread from one country to another.