BUSINESS

Top ECB official: Greece must fulfil reform targets '100 per cent,' cool on more time

07/01/2012 05:00 EDT | Updated 08/31/2012 05:12 EDT
BERLIN - Greece must fulfil the targets of its austerity and reform program "100 per cent" to stay in the euro, a top European Central Bank official said Sunday — offering little hope of substantial wiggle room for Athens and questioning whether it can be given more time to comply.

Greece's new government wants to lower some taxes, freeze public sector layoffs and extend by two years the mid-2014 deadline for austerity measures demanded by creditors in exchange for loans that are keeping the country afloat, conditions that are hugely unpopular in the country.

But ECB executive board member Joerg Asmussen told Germany's ARD television that there can be no departure from the aims of consolidating Greece's budget and restoring its competitiveness.

"The so-called mix of measures — in other words, how do I reach the target — one can talk about that," he said. But that, he added, means that "if the government intends to lower a tax, it will have to increase another tax by the same amount."

Asked whether Greece would get more time to comply, Asmussen replied: "I don't think so." He noted that any extension would lead to a need for more external financial help — "that means that the other 16 eurozone states and the IMF would then have to provide more financing."

The ECB is part of the so-called "troika" of debt inspectors overseeing the Greek program, along with the European Commission and the International Monetary Fund. On Monday, the inspectors are expected to start their review of the country's finances and meet with the new government. Their conclusions will be critical to whether Greece will be able to renegotiate parts of its international bailout conditions.

"My preference and the preference of the ECB is very clearly that Greece remain in the eurozone," Asmussen said. "For that, the country must implement 100 per cent the program targets that were agreed."

An exit, he said, would make things economically difficult not just for the country leaving the eurozone but also for all the others.

Other eurozone countries — in particular Germany, the bloc's biggest economy — have appeared cool to giving Greece much of a break on its targets or timeline.

"From Germany's point of view, a substantial loosening of the program, of the reform agreements, does not come into consideration," Foreign Minister Guido Westerwelle said Sunday. He insisted that Greece must implement those agreements "step by step, solidly and reliably."

At a European Union summit last week, German Chancellor Angela Merkel made concessions to Italy and Spain — notably agreeing to allow countries that pledge to implement reforms demanded by the EU's executive Commission to tap rescue funds without having to go through the kind of tough austerity measures demanded of Greece.

But officials insist that help to struggling countries and banks will still come with strings attached, and that Germany has no intention of agreeing to share government debt through jointly issued eurobonds in the foreseeable future. Berlin fears that would cut struggling countries' borrowing costs at its expense and also take pressure off them to get their finances and economies in order.

Westerwelle, a member of the pro-market Free Democrats — the junior partner in Merkel's coalition — insisted Sunday that eurobonds should stay off the table permanently.

"Too little solidarity endangers Europe, but too much solidarity does not endanger Europe any less," he said.

"Even if we already lived in a European federal state, I would be strictly against us Germans taking on liability for all debts in all of Europe."