The euro zone will stay intact even if a vulnerable country ends up leaving the currency bloc, Luxembourg’s Finance Minister told CNBC.
“If somebody does not comply with the rules of the game, if somebody leaves we would be better prepared today to make sure there is no contagion to other countries. We are in a less panicked situation that we were some months ago,” Luc Freiden said.
While left unsaid explicitly, there has been speculation even among senior European policymakers that Greece is vulnerable to an exit from the currency bloc as it battles to retain its place in the face of political instability and weak economic indicators.
Analysts at Citigroup Global Markets suggested in June that the likelihood of Greece exiting the euro zone within the next 12 to 18 months was between 50 and 75 percent. (Read more: Likelihood of Grexit Still 50-75%)
Markets are eagerly anticipating the outcome of a crucial European Central Bank meeting on Thursday after which President Mario Draghi is expected to detail a program of short-term debt purchases.
Frieden added that euro zone members were committed to stabilizing the euro zone but the Greek government would have to do its part and implement structural reforms.
“The consensus is to ensure the euro zone is stable in the long term. The troika report is important to see if there is a need to extend the program but to see what still needs to be done. The structural problems in countries like Greece are much bigger so reforms are important in the long term,” he added.
He gave no indication of an imminent Spanish bailout but admitted that there were significant problems facing the country. The central government there has struggled to prop up its ailing banking sector amid continuing problems in its regions with a number having formally requested a lifeline from Madrid.
“There are a lot of problems in Spain [including] the banking sector, and we are ready to do other things but as there has been no request we should not deal with the hypothetical,” Frieden said.
The Secretary-General of the Organization for Economic Cooperation and Development (OECD), Angel Gurria has also urged the ECB to do more for the euro and ensure the currency bloc’s survival, arguing that unlimited bond buying should start “the sooner, the better” and adding that no one should leave the euro zone.
Moody’s, the credit rating agency, downgraded the euro zone’s Aaa outlook to negative on Monday, warning it might downgrade the bloc if it decides to cut the ratings of the four biggest budget backers; Germany, France, the U.K. and the Netherlands.