FRANKFURT (Reuters) - Steps should be taken to ensure that the euro zone currency bloc could withstand a possible insolvency of one of its members, Germany's Bundesbank said in its monthly report on Monday.
"The financial and state debt crisis ... has yet to be overcome," the Bundesbank said in the report, reiterating that individual states and investors should take primary responsibility for their debts.
"In this respect, the currency union ought to be able to withstand the extreme case of the insolvency of a member state."
The Bundesbank's statement, which came with recommendations that steps be taken to ensure big banks can be wound up while minimising any impact on countries, addresses a taboo in the euro zone, namely that a member state could become insolvent.
The remarks come at a sensitive moment, when Greece's new government is attempting to negotiate a new deal with its international lenders including euro zone countries such as Germany.
In its report, the central bank also predicted a continued economic improvement in Germany in the second quarter of the year, thanks to foreign and domestic demand.
"The German economy will have grown strongly in the first quarter of the year after a surprisingly strong expansion at the end of 2014," said the report.
"There are also signs of a continued vigorous upward economic movement in the second quarter."