Greek impasse prompts euro exit warnings, rattles markets

"If Greece moves towards exiting the euro ... the EU would then need to enlarge its bailout funds and prepare other emergency measures," said Charles Grant, director of the CER think-tank in London. ... "They should tell the Greeks that if they wish to stay in the euro they cannot avoid austerity and structural reform ... But to raise the Greeks' morale the EU will have to relax Greece's deficit reduction targets, write off much more Greek debt and think more imaginatively about how to encourage external investment in Greece. Merkel will find such policies harder to embrace than Hollande."