EUROPEAN leaders should take adequate action to solve the euro-zone crisis to prevent its "relentless" spiral from becoming a larger threat to emerging markets and global economic stability, Finance Minister Pravin Gordhan said in an interview on Friday.
SA should not be "paralysed" by the crisis and should focus on promoting growth in a "bolder and more creative" way, he said.
There was real concern that the effect of the crisis on capital flows to emerging economies such as SA could become a destabilising phenomenon, he said.
He spoke as fear worsened that an untidy Geek exit from the euro zone would have far wider global implications, and as the Institute of International Finance said the cost of a Greek exit would be unmanageable and probably exceed its previous estimate of almost $1,3-trillion.
Separately, the co-CEO designate of Deutsche Bank, Juergen Fitschen, described Greece as a "failed state" on Friday while some of Europe's biggest fund managers have begun dumping euro assets owing to fear of a Greek exit.
Mr Gordhan said the crisis affected trade and the stability of the financial sector, currencies and capital markets of emerging-market economies.
In particular, he said, the effect on capital flows was a "real area of concern and at this stage no global institution has come with an adequate answer on how the impact on volatile currencies and capital flows can be better managed. This is a scary area that justifiably calls for urgent attention (and) it is a potentially destabilising phenomenon for emerging market (economies) such as SA," Mr Gordhan said.
Investec economist Annabel Bishop said the rand's recent weakness could be attributed to uncertainty about Europe.
"The concern lies around how markets would react (to a Greek exit and) clearly the imperative is a well-managed exit to avoid sovereign debt contagion," Ms Bishop said.
First National Bank CEO Michael Jordaan said there would be "zero direct impact" on SA's banks as they were not exposed to Greek banks or bonds, and Nedbank CEO Mike Brown said the banking sector would survive as it did the last crisis.
"Any potential impact will be indirect - that is, if the Greek exit were to result in lower European GDP growth it would affect South African exports, especially if the euro weakens. However, this may be offset by the weaker rand," Mr Jordaan said.
Mr Gordhan said European institutions and leaders should not "fall behind the curve" as they had done previously to delay solving the crisis.
"The danger is that unless adequate action is taken timeously we will continue (to see) the relentless spiral which then drags down all parts of the globe," Mr Gordhan said.
"SA managed fairly well in the last crisis of 2008-09 and we are watching carefully and ensuring that we can anticipate anything that might happen (in Europe)."
While SA's financial sector would be insulated from a Greek exit, there would be an even greater effect on trade channels to Europe, which already had been "incrementally worsening".
The minister said he was encouraged by the renewed focus by Group of Eight leaders on growth and employment creation because this was key to helping Europe move out of its "woeful state" and to stimulating global economic growth.
Mr Gordhan said despite the crisis, SA should exploit opportunities to promote trade and investment with African countries and boost intra-African trade.
"We cannot be held hostage or be paralysed with developments elsewhere in the world. Government, business and society will need to find a common ground that will enable us as a nation to be more assertive, creative and bolder in terms of what we (can) do to promote growth," he said.