Greece may be forced out of eurozone - German MP

Greece may have to temporarily leave the euro currency bloc in order to shore up its finances, a member of Germany’s junior coalition party said today.

Juergen Koppelin, a budget spokesman from Germany's free democratic party, said on German radio a temporary exit from the single currency would allow the debt-ridden nation to bolster its financial health by devaluing its currency.

But the call from a member of Angela Merkel's centre-right coalition comes despite the German Chancellor yesterday ruling out the option of Greece leaving the single currency zone.

Merkel also said Greece will only be able to access the €45bn aid package, recently agreed by the EUand IMF, if it puts in place tough austerity measures.

A new round of protests staged by Greek unions is expected, however, as the public backlash against the Socialist government's handling of the crisis shows no signs of abating.

Meanwhile, the country's central bank chief George Provopoulos said in an annual report to shareholders the country should take a tougher approach to reducing its deficit. He suggested Greece should shrink its budget deficit by 5% of GDP or more this year to restore market confidence.

He also warned Greece's economy could contract at a faster rate than the 2% estimated by the Bank of Greece, bringing further uncertainty to the country's economic prospects.

Yesterday, the country's bond markets plunged further as the yield on two-year Greek government bonds increased by 3 percentage points - its biggest one day jump since joining the single currency.