Greece exit from eurozone OK - Germany

Berlin - The German government believes that the eurozone will now be able to cope with a Greece exit if that proved to be necessary, a report says.

Both Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble believe the euro zone has implemented enough reforms since the height of the regional crisis in 2012 to make a potential Greece exit manageable.

"The danger of contagion is limited because Portugal and Ireland are considered rehabilitated," the report says.

Exit almost unavoidable

In addition, the European Stability Mechanism (ESM), the euro zone's bailout fund, is an "effective" rescue mechanism and was now available, another source added. Major banks would be protected by the banking union.

It is still unclear how a euro zone member country could leave the euro and still remain in the European Union, but the report quoted a "high-ranking currency expert" as saying that "resourceful lawyers" would be able to clarify.

According to the report, the German government considers a Greece exit almost unavoidable if the leftwing Syriza opposition party led by Alexis Tsipras wins an election set for 25 January.

The Greek election was called after lawmakers failed to elect a president last month. It pits Prime Minister Antonis Samaras' conservative New Democracy party, which imposed unpopular budget cuts under Greece's bailout deal, against Tsipras' Syriza, who want to cancel austerity measures and a chunk of Greek debt.

Economic reform

Opinion polls show Syriza is holding a lead over New Democracy, although its margin has narrowed to about three percentage points in the run-up to the vote.

German Finance Minister Schaeuble has already warned Greece against straying from a path of economic reform, saying any new government would be held to the pledges made by the current Samaras government.