FRANKFURT (MNI) – The next Greek bailout program will be the last
one, European Central Bank Executive Board member Juergen Stark said in
an interview with German daily Frankfurter Allgemeine Zeitung on Friday.

“Support programs must not continue indefinitely. With the [new]
program Greece is getting a chance, a final chance,” Stark told the
newspaper.

“If the conditions for structural reforms, privatization and fiscal
policies are not met, than there will be no further aid. This option
must always exist and must also be made clear,” Stark said.

The ECB’s chief economist said that Greece and other highly
indebted countries must push ahead with reforms. “Only if they reduce
their deficits by their own efforts will they be able to ensure
continued growth and employment as euro area members,” Stark said.

“Financial support is not the solution. It is only a vehicle to put
these countries in a position to manage their affairs again in
sustainable manner,” he said.

He reiterated that the ECB continues to believe Greek debt is
manageable and no restructuring is necessary as long as the Greek
government sticks to the EU/IMF program.

From an economic perspective, the involvement of the private sector
in a new bailout is secondary, Stark argued. At the same time, if the
nature of the private sector involvement is not clarified soon, a
dangerous situation may occur, Stark said. It remains unclear whether a
voluntary rollover of Greek debt would prompt a move by rating agencies,
he added.

A downgrade to “selective default” or “default” would result in the
“next dramatic phase of the crisis.” Stark warned. “Very negative
effects on the Greek banking system, the economy and not least other
countries, would have to be feared.”

He also reiterated that the ECB would no longer be in the position
to accept Greek debt as collateral in its refi operations should they be
rated selective default.

In the face of repeated reports and declarations by senior EU
officials that Executive Board member Lorenzo Bini Smaghi will step down
to free his seat for a French candidate once fellow Italian Mario Draghi
takes over as ECB President in October, Stark stressed that every board
member is appointed for eight years and is independent from political
influence.

Calls on Bini Smaghi to resign by Italian Prime Minister Silvio
Berlusconi “show how little the politicians have understood the
independence of the ECB,” Stark said.

–Frankfurt Bureau tel.: +49-69-720 142, email: jtreeck@marketnews.com

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