UPDATE 1-ECB Weber-Euro zone faces serious Greek contagion risk

* ECB’s Weber sees serious contagion threat from Greek woes

* Says Greek default would pose risk to euro zone

* Tells German MPs contribution to aid package justifiable

(Adds details, quotes, changes dateline)

BERLIN, May 5 (BestGrowthStock) – There is a serious threat of
Greece’s problems spilling over to other parts of the euro zone,
European Central Bank Governing Council member Axel Weber said
on Wednesday.

Weber, who heads the German Bundesbank, told German
parliamentarians it was justifiable for Germany to contribute to
the 110 billion euro ($147 billion) aid package for Greece.

“A Greek default in the current very fragile situation would
pose a substantial risk to the stability of monetary union and
the financial system,” he said in opening remarks to the
parliament’s budget committee.

“There is a threat of serious contagion effects for other
euro zone countries and increasing negative feedback effects for
capital markets.”

Greece alone could not free itself from the crisis, and its
ability to raise funds on markets was “severely endangered”.

Weber said the aid package was acceptable because it was
tied to strict conditions, including savings measures and
reforms promised by Athens.

“It is decisive that the programme is tied to strict
conditions, which will be checked quarterly,” he said. “Only
this strict conditionality makes the support measures

Weber’s concerns were echoed by International Monetary Fund
chief Dominique Strauss-Kahn, who told Le Parisien there was a
risk of the Greek debt crisis spreading to the rest of Europe,
but no real threat for big countries such as France and Germany.

“There is always a risk of contagion,” he said. “Portugal
has been mentioned, but it is already taking measures and the
other countries are in a much more solid situation … but we
should remain vigilant.” [ID:nLDE64409G]

Given its parlous position, it was acceptable for Greece to
delay reducing its budget deficit to below 3 percent of gross
domestic product until 2014, Weber said.

The Bundesbank head also urged reforms to European Union
budget rules and statistical procedures to make sure no other
countries ran into similar difficulties.

“In hindsight, there have to be precautions on the fiscal
framework and on statistics, so that such a situation is never
repeated,” he said.
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(Reporting by Brian Rohan, writing by Krista Hughes, editing by
Mike Peacock)

UPDATE 1-ECB Weber-Euro zone faces serious Greek contagion risk