HELSINKI (MNI) – The Eurozone economic recovery is underway and not
endangered by the crisis in Greece, where prospects have improved as a
result of the aid plan, European Central Bank Governing Council member
Erkki Liikanen said Tuesday.

The head of the Bank of Finland, speaking in separate interviews
with Finnish MTV3 and YLE, said that while ECB interest rates are
appropriate at their current historical low, they will eventually rise.

“The recovery in the Eurozone is in progress and Greece won’t stop
the recovery,” Liikanen said. “The Eurosystem is not near collapse. The
Greece situation has showed that we can work in challenging situations.”

“Last week the situation [in Greece] looked weaker, but now we are
going in a better direction,” he said, noting the recent decline in the
interest rates Greece must pay to finance its debt. This development has
included other countries as well, he observed.

According to Liikanen, “the ECB’s interest rates are at an
appropriate level currently considering the economic situation. However,
they are historically low and will rise in the future.”

The Greek aid package is viewed with confidence at the ECB, he
said. “We trust that it will succeed … We also believe that [the
individual nations] will receive repayment for the loans. Central banks
are usually very careful and if we recommend something it’s fair to say
that the risks are limited.”

The aid package has been “carefully measured with best possible
knowledge” and is “adequate,” Liikanen asserted. “The first two years
are the toughest. If Greece won’t act according to the conditions,
payments can be stopped. All decisions of new loans are made
unanimously, which means that every nation has veto power.”

“I believe that national parliaments will approve the aid, but of
course democracy means that national parliaments have the highest power
to make the final decisions,” he conceded. However, the refusal of one
country to participate wouldn’t bring the aid plan down, he said.

The International Monetary Fund and ECB are “following the
situation carefully,” he said.

“The problems in Greece are vast, their competitiveness has
decreased and readjustment will take time,” Liikanen said. Calling on
the opposition to support the government in the present situation,
Liikanen affirmed Greece’s need for “a new beginning.”

“Greece is committed to action,” he said. “There will be a few hard
years ahead. The economy must be modernised, competition must be
increased and regulation reduced.”

Lessons must be drawn from this experience, he demanded, among them
being that the European Commission must have a better grasp of national
statistics. Greece, however, “has been an exception in the accuracy of
government statistics” in the Eurozone, he claimed.

Moreover, “it’s important that every Eurozone country balance its
public sector,” he urged. The Stability and Growth Pact has “not
functioned well enough,” he said.

–Frankfurt bureau tel.: +49-69-720142. Email: frankfurt@marketnews.com

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