The risk of Greece becoming insolvent is increasing daily, the head of the German central bank said on Thursday, warning that the risks of contagion could not be underestimated.
"There is a strong determination to help Greece ... But time is running out, and the risk of insolvency is increasing by the day," Bundesbank chief Jens Weidmann told a London investment seminar as Greece and its European partners intensify efforts for a bailout deal to prevent Athens from defaulting.
The contagion effects of a possible insolvency scenario were "certainly better contained than they were in the past, though they should not be underestimated. But the main losers in that scenario would be Greece and the Greek people," he insisted.
And he added that "an erosion of the principles of monetary union also has consequences for ... monetary union that no-one should downplay."
Weidmann was adamant that Greece must meet its reform commitments if it expected its eurozone partners to help it out.
"Solidarity can only be expected if conditionality is accepted. Otherwise, the root causes of the problems will not be addressed," he said.
Partner countries were determined to help Greece "improve its public administration, remove barriers to growth and put public finances on a sustainable path. And taxpayers from other euro-area countries have provided substantial funds to support the unavoidable adjustment processes," Weidmann said, adding that Greece too has to play its part.