VIENNA (MNI) – Greece must exhibit utmost discipline and honor the
promises it has undertaken, but it will also need some expansive
policies to help it dig out of the debt hole in which it is mired,
European Central Bank Governing Council member Ewald Nowotny said
Monday.

“We have to demand massive discipline and contract loyalty from
Greece, but in the tradition of the Marshall Plan, expansive policies
and positive elements also play an important role,” Nowotny said,
referring to the U.S.-funded reconstruction plan for Europe in the
aftermath of World War II.

Nowotny, who is governor of the Austrian National Bank, was
speaking at an event marking the 50th anniversary of the Organization
for Economic Cooperation and Development, which was originally founded
in order to oversee implementation of the Marshall Plan — essentially a
massive stimulus package.

“On an international level we are discussing restrictive policies,
but we still have to keep in mind this expansive aspect,” Nowotny said.
“The combination of both — discipline and expansive policies — is
important and increases the chances of implementing a difficult
programme over the long term.”

Greece, which has promised to implement a series of draconian
deficit-cutting measures and other unpopular reforms in exchange for
E110 billion in aid from the EU and the International Monetary Fund, is
experiencing a sharp recession whose effects are expected to be
prolonged because of the harsh contractionary policies being imposed on
the country.

Nowotny spoke as Eurozone finance ministers gathered in Brussels to
begin a meeting that is expected to focus on putting together a second
bailout package for Greece, this time with some as-yet undefined
contribution from private sector creditors.

Nowotny also touched on the increasingly controversial issue of
rating agencies, which are back in the limelight after Moody’s downgrade
of Portugal last week contributed heavily to new and serious tensions in
sovereign debt markets.

The Austrian central bank chief cited the “problematic” aspects of
rating agencies, which he said were their pro-cyclical affects and the
vexing question of “how you can come to a sensible and rational policy”
with regard to them.

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