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UPDATE 1-IMF chief sees risk of Greek contagion -paper

Published 05/05/2010, 02:36 AM
Updated 05/05/2010, 02:52 AM

* Strauss-Kahn says no real risk for France, Germany

* Countries pulling out of euro zone, would be end of euro

* Nations can step aside of Greek plan if measures not taken (Adds details)

PARIS, May 5 (Reuters) - The International Monetary Fund's chief said there was a risk of the Greek debt crisis spreading to the rest of Europe, but there was no real threat for big countries, including France and Germany, a French newspaper reported on Wednesday.

"There is always a risk of contagion," Dominique Strauss-Kahn told Le Parisien newspaper. "Portugal has been mentioned, but it is already taking measures and the other countries are in a much more solid situation ... but we should remain vigilant."

Strauss-Kahn said under the terms of the deal the plan will be monitored every three months, but if the measures were not taken the international community "might have to step aside," although there was no suggestion that would happen.

Renewed selling gripped euro zone financial markets on Tuesday as concerns mounted that the record 110 billion euros EU/IMF rescue package for Greece would not stop a debt crisis spreading to other weak euro zone members.

There was no real risk for France and Germany, or other big European countries, Strauss-Kahn said without specifying.

The IMF chief said the Greek aid plan had a primary goal to save Greece faced with too much debt and too weak competitiveness.

"It was in the edge of bankruptcy and soon it would not have been able to pay its civil servants." Strauss-Kahn said, in his first interview since the debt deal was struck.

He dismissed any suggestions of Greece or any other European country pulling out of the euro zone, calling any such move the "end of the euro." (Reporting by John Irish and Marie Maitre; Editing by Kazunori Takada)

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