Bundesbank says Greek euro exit would be 'manageable' "A significant dilution of existing agreements would damage confidence in all euro area agreements and treaties and strongly weaken incentives for national reform," it said. Greece holds a second election on June 17 after a previous poll produced a parliament split between supporters and opponents of the bailout programme, which requires Athens to make deep spending cuts and hike taxes. Anti-bailout parties are expected to repeat their strong performance, opinion polls show, increasing the risk that Greece will renege on its austerity pledges, default on its debt and possibly leave the single currency. The Bundesbank said the Eurosystem of eurozone central banks had assumed "considerable risks" by providing Greece with large amounts of liquidity. "In light of the current situation, it should not significantly increase these risks," the bank said. Instead, the parliaments and governments of the member states should decide on the manner in which any further financial assistance is provided and therefore whether the associated risks should be assumed. German finance minister Wolfgang Schaeuble reiterated on Wednesday Berlin's insistence that Greece take its austerity medicine in order to regain competitiveness and resume growth. "The Greek people must install a competent government," he told German radio. (The austerity measures) are agreed not because we want to punish the Greeks but because they are necessary. The Bundesbank said in its report that it would be crucial to phase out the eurozone's non-standard monetary policy measures in the future, to contain the risks arising from them such as distorting competition in the banking sector or inciting the delaying of structural reforms. The Bundesbank said Germany's economic upswing would continue in the second quarter, driven by construction and consumption, while the manufacturing sector would "probably only make a comparatively small contribution." "In light of all this, calls on German fiscal policymakers to loosen their fiscal policy stance in order to stimulate the economy appear inappropriate," the bank said. Attempting to kick-start the economy in the short term and putting off consolidation efforts in the long term are not conducive to regaining lost confidence.