Chancellor Angela Merkel rejected on Wednesday pressure from some German lawmakers to hit private holders of Greek bonds harder, saying that forcing them to take losses could unleash contagion in Europe and beyond that was hard to control.
She told members of the Bundestag's European affairs committee that imposing a so-called "haircut" on private Greek creditors would "push countries under the EFSF [rescue mechanism]that are currently able to solve their problems on their own.
"Then we will have a situation in which other countries, but not Germany, are unable to recapitalize their banks without becoming targets of the markets, and we spark contagion in Europe that I don't want to be responsible for."