German Chancellor Angela Merkel on Sunday said that she can not rule out letting a eurozone country default on its debts. Merkel said that this is a possibility to consider once the Eurozone has a permanent rescue fund in place.
In a one-hour interview with ARD television, Merkel said a permanent rescue fund is necessary to prevent crisis in countries such as Greece from spilling over to other countries that use the euro as their currency.
The Bundestag, the German parliament, Thursday will vote on expanding the powers of the European Financial Stability Facility. This is a temporary facility that can buy troubled government bonds and bail out banks.
The permanent successor to the EFSF will be known as the European Stability Mechanism. The ESM is currently set to start in 2013. European national parliament, including the Bundestag, still have to approve the creation of such a mechanism.