Andreas Dombret

The situation in Greece is critical but the direct danger to European banks is relatively small, a senior official at Germany's Bundesbank told a newspaper on Monday.

The provision of European Central Bank emergency liquidity to Greece is ?directly correlated? to the health of its banks and will continue as long as the preconditions are met, a top policymaker from Germany?s Bundesbank said on Tuesday.

Bundesbank board member Andreas Dombret declined to say how the ECB should respond if Greece defaulted.

Additional Eurozone assistance to indebted Greece is dependent on Athens improving the state of its finances, German central bank executive Andreas Dombret said in Johannesburg on Friday.

European Central Bank Vice President Vitor Constancio signaled that large-scale asset purchases are the next step policy makers are prepared to take if the inflation outlook worsens.