FRANKFURT (MNI) – Even the newly agreed aid package for Greece
cannot violate the basis principles of the currency union, European
Central Bank Governing Council member Axel Weber said Wednesday.
The sanction mechanism of the Stability and Growth Pact to keep
Eurozone member states within the boundaries of the Maastricht Treaty
should be expanded, the Bundesbank president said in remarks prepared
for delivery at a banking conference in Stuttgart.
To keep something like the Greece crisis from happening in the
future, prevention “must be strengthened,” Weber pleaded, so as to
reconstruct and maintain the sustainability of public budgets.
The Stability and Growth Pact plays a “decisive” role in this
pursuit. It is essential for the future effectiveness of the Pact that
all member states abide by the Pact’s requirements, thereby encouraging
“a quick reduction of deficits not merely to below the 3% [of GDP]
level, but rather to a level of approximately structural balance,” he
said.
“Furthermore, fiscal surveillance [within the Union] should be
strengthened and the sanction mechanism for violations should be
expanded to recognize fiscal policy aberrations earlier and be able to
act against them with more determination,” he urged.
While a national stabilization fund might be suitable for dealing
with crises in the financial system, Weber strictly dismissed such a an
instrument for countries in crisis.
This “would undermine fiscal responsibility in the currency union
and, thereby, undermine one of its foundation,” he said.
“The maintaining of the basic principles of the currency union
forms, however, a red line that cannot be crossed under any
circumstances. This is equally true for the aid mechanism in the case of
Greece as for the adjustment of the rulebook for fiscal policy,” he
said.
Like the financial crisis, an unusual situation such as Greece’s
necessitates “previously unthinkable measures” to prevent even worse
damage, Weber explained.
“It is now the task and the duty of Greece to justify” the trust
shown to it through the activation of the aid mechanism by implementing
its consolidation program, Weber urged.
The Greek budget has fallen out of balance and “without quick and
far-reaching counter measures” the country would not be able to service
its debt, he said.
Speaking about the German economy, Weber said that the domestic
economy has been surprisingly resistant.
–Frankfurt bureau; +49-69-720142; frankfurt@marketnews.com
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