German Chancellor Angela Merkel said that Greece is taking theright steps to get its next bailout payment, warning againstallowing a Greek default because of the risk of contagion for othereuro-area countries.

Merkel, in a German radio interview broadcast today, said thatan “uncontrolled insolvency” would further roil markets spooked bythe prospect of a Greek default. The euro region currently has nosystem for “orderly” insolvency until the permanent rescue fund isestablished in 2013, she said.

“The top priority is to avoid an uncontrolled insolvency,because that wouldn't just hit Greece and the danger that it hitseveryone, or at least a number of other countries, is very big,”Merkel told Berlin-based broadcaster Inforadio. “I have made myposition very clear: that everything must be done to keep the euroarea together politically, because we would very quickly face adomino effect.”

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