Merkel moots eurozone expulsion for fiscal sinners

(BERLIN) - The 16-nation eurozone must have the option of expelling a member from the club if a country persistently breaks its rules, German Chancellor Angela Merkel said Wednesday.

In light of the fiscal crisis in Greece, Europe needs "a treaty framework in which it would even be possible as a last resort to exclude a country from the euro if it again and again breaks the conditions over the long-term," she said.

The chancellor added that the current rules in the European Union's Stability and Growth Pact were no longer sufficient to deal with the current crisis, which she described as the euro's "greatest-ever challenge."

"We did not think that we could come to a situation in the euro area in which a country was threatened by bankruptcy," she said during a general debate in parliament.

Nevertheless, she insisted that "no country should be left on its own" amid a crisis that has seen speculators attack debt-laden Greece and confidence in the euro shaken on the international financial markets.

"Europe is not only a community of peace, it is a community of stability," she said.

Turning more directly to the crisis in Greece, Merkel said that "rapid support" was not the right answer and that the problem must be "attacked at the roots."

"A show of rapid support cannot be the correct solution ... we should not offer premature aid, but get everything back in order. Anything else would be disastrous," said Merkel.

Europe must avoid "rash aid that does not help matters in the long-term but would actually weaken the euro."

On Tuesday, European finance ministers backed measures Athens has taken to curb spending and raise taxes as it battles with a budget deficit more than four times the maximum permitted by the Stability and Growth Pact.

Meeting in Brussels, the ministers also insisted that a contingency plan to save Greece from bankruptcy with emergency loans was only prudent foresight and unlikely to be enacted.

Meanwhile in Greece, where the austerity measures have triggered strikes and protests, a government spokesman demanded more clarity on the plan, which has not yet been fleshed out in public.

Eurogroup chief Jean-Claude Juncker has pledged the club "would be ready" to provide loans to Greece if the country continues to be the victim of "unreasonable" speculation.

And on Tuesday, Athens received some rare good news from Standard & Poor's, a international credit rating agency, which said it was maintaining Greece's credit ratings and lifting a threat in the short-term to downgrade the note.