PARIS (MNI) – Eurozone governments must continue to aid Greece in
order to prevent the collapse of monetary union, French Finance Minister
Francois Baroin said Sunday, playing down the apparent gridlock over the
sovereign debt crisis.

If the EU finance ministers meeting this weekend in Poland took no
action, it was because there has been a delay in the joint report of the
EU, the IMF and the ECB on Athens’ progress in cutting its deficits,
Baroin explained in a radio interview.

The Troika officials “are continuing their work,” he said. “Greece
knows what it needs to do. We told them that.”

Athens “has obligations to its creditors; it must therefore produce
results,” Baroin insisted. “But it’s up to the [Troika] observers to
compile their report, and we will examine that report.”

Reacting to a recent opinion poll showing that two thirds of French
oppose further aid to Greece, the minister said, “We are not giving
money to Greece. Regardless of the sympathy we may have for the Greeks,
it’s not for the pleasure of solidarity for Greece — it’s to save the
euro.”

This must be done by supporting Greece “in the form of loans, not
gifts,” he added.

Baroin expressed “confidence” that Athens would fulfill the
conditions for further financial assistance, which “clearly depends on
the capacity of the Greek government to implement the commitments it has
made.”

Baroin was also confident that strategy of EU leaders to dispel the
doubts of investors about the cohesion of the Eurozone by enhancing the
European Financial Stability Facility would be successful. “By the end
of first half of October, this fund will be operational, because all
parliaments will have ratified it,” he predicted.

Europe will emerge stronger from this crisis, as it has from
previous crises, he argued. “We have a problem of governance: we must
learn the lessons from this series of crises. The status quo is no
longer possible,” he said. “We must improve the governance of the
Eurozone.”

The minister said there was no problem of liquidity or solvency in
the banking sector, reminding that central banks had pledged themselves
to supply necessary liquidity. Banks must also boost their capital, but
not at the expense of financing the economy, he stressed.

Despite the slowdown in domestic activity in recent months, Baroin
asserted that 1.75% GDP growth is still achievable next year. But
whatever happens with the economy, the public deficit target of 4.5% of
GDP “will not be overshot by a single euro,” he pledged.

Next year’s budget, to be unveiled in the coming weeks, will be
“demanding” on the part of all, he said. All ministries will have to
take part in the “collective effort of savings.”

There will be no budget leeway for economic stimulus, he warned. “I
am convinced that stimulus, that it to say public spending, would not
only have a negative impact, but a very negative impact in the current
financial situation.”

–Paris newsroom +331 4271 5540; email: ssandelius@marketnews.com

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