VIENNA (MNI) – There must be “clarity” on Greece by mid-November,
when Athens is expected to run out of cash if it does not receive a
E31.5 billion loan disbursement from its bailout package, European
Central Bank Governing Council member Ewald Nowotny said Monday.

Speaking at a conference here, Nowotny, who heads the Austrian
National Bank, said that the prospect of another debt haircut for Greece
– this time by its official sector creditors – must be considered both
on a political and economic level.

“On the economic side, if Greek wants to stabilize, it will need
time. But politically you have to consider the danger of contagion for
other countries,” he said.

Nowotny declined to speculate on the possibility of another debt
reduction deal for Athens. But he stressed that if there were such an
initiative, the ECB could not forgive any of the Greek debt it holds.
“This would amount to indirect state financing” and would violate the
central bank’s legal framework, he said.

He added that any official sector haircut on Greek debt could only
come from Eurozone member states, which have loaned money to Athens
bilaterally.

With regard to Spain, Nowotny argued that the bursting of the real
estate bubble there was “not necessarily a bad thing.” Rather, it “is a
correction phase the country has to go through,” he said.

The Austrian central bank chief observed that the mood among
European companies was not very upbeat with regard to the European
economy. At the last meeting between senior ECB officials and
managing directors of large European companies, the participants did
“not have a very optimistic perspective,” he noted.

Nowotny stressed the importance of his country staying in the
Eurozone, which is “the most important export region for Austria,”
accounting for more than 50% of its exports.

He added that the Eurozone offered “a safe and stable trading
environment” for Austrian companies because of price stability and
because the single currency makes foreign exchange hedging unnecessary,
thus providing a “competitive advantage.”

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