Merkel rival warns of impact of Greek default

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Peer Steinbrueck cautioned that German taxpayers could foot the bill from loan guarantees.

German taxpayers should be warned of the consequences of a Greek default, a rival to Chancellor Angela Merkel has said.

Peer Steinbrueck, the Social Democrats' candidate for the role of German chancellor at next year's election, said the German public need to be told that the loan guarantees Germany has provided for Greece could leave taxpayers footing a hefty bill.

“One must tell the people that Greece could default on these loans," Mr Steinbrueck is reported to have said. "We in Germany have to make sacrifices to help hold Europe (Chicago Options: ^REURUSD - news) together. We're already part of a ‘liability union’.”

“We were ready to pay money for the costs of German reunification - something all of our neighbours welcomed despite the bad experiences they had had with us," he said, a reference to the Nazi regime.

“Now is time that we have to ask ourselves the question: what is Europe worth to us?”

Mr Steinbrueck also cautioned that it would take troubled Greece, which is awaiting its next tranche of international aid, a further eight years before it could fund itself in the capital markets.

"We're going to have to build a bridge for this period and that's going to cost money," he added.

Eurozone finance ministers are preparing to meet on Monday in an effort to agree a deal that would release at least € 31bn (£25.1bn) of aid to Greece, after failing to reach an agreement on Wednesday.

“There’s no time to waste,” Mrs Merkel said yesterday. A solution for Greece “is being intensively worked on”.

Finance ministers will hold a conference call today ahead of next week’s meeting.