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Germany facing loss of export earnings -

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Germany facing loss of export earnings

Jennifer Macey reported this story on Friday, February 12, 2010 12:24:00

ASHLEY HALL: Neither Germany nor France can afford to let Greece go bankrupt. Both countries are
heavily exposed to Greek Government debt.

So how do the solid economies feel about bailing out their struggling neighbour?

Jennifer Macey spoke earlier to Brigitte Scholtes, the economics correspondent for Deutschland
Radio, Germany's national broadcaster.

BRIGITTE SCHOLTES: I think most Germans or at least the German politicians know that it has to be.
Greece has to be helped because otherwise the euro or the euro area will be collapsing and...

JENNIFER MACEY: But what about the ordinary Germans? There still are a lot of people out of work.
Are these the people who would be upset if Greece is bailed out?

BRIGITTE SCHOLTES: I don't think they do connect it that much to Greece. They do connect it to the
financial crisis. There is a lot of anger about banks but not as much about Greece.

JENNIFER MACEY: If Greece goes bankrupt and the euro collapses what does that mean for the German

BRIGITTE SCHOLTES: This might really be the next crisis or the start of the next crisis. If Greece
would fall then other southern European countries could follow. And this might be the end of the
economic union. This might be a very big problem for the German economy because the German industry
of course is in greatest part an export oriented industry.

JENNIFER MACEY: And its greatest export partners are within the European Union?

BRIGITTE SCHOLTES: The greatest export partners are within the European Union so if the European
Union fails, its economy goes down, Germany would suffer first.

JENNIFER MACEY: Neither Germany nor France have said that they will bail out Greece but what are
their roles in this situation?

BRIGITTE SCHOLTES: France and Germany as well as Italy are very much involved because they bought a
lot of government bonds which Greece issued. If these government bonds cannot be paid back by
Greece then all those institutional investors like banks or insurances will have to suffer losses.
And this might result in our banks being not able to give credit, to give loans to the economy.

JENNIFER MACEY: Does this put a question mark on Germany's involvement in the EU project?

BRIGITTE SCHOLTES: No, not at all. I think France and Germany will stick to the EU project. It
might result in a core economic union, which is to say the core member countries like France, like
Germany, like even the small, Luxembourg or Belgium, that they might still from the economic union.

And all those southern European countries which might not stick to the budget discipline, they
might get out of the economic union for a while and maybe get back if they promise to bring their
houses in order.

ASHLEY HALL: Brigitte Scholtes the economics correspondent for Deutschland Radio speaking to
Jennifer Macey.