–Adds comments on European Monetary Fund, Stability & Growth Pact

BRUSSELS (MNI) – Financial support to Greece should be tied to
stringent conditions, and the rules of the stability and Growth Pact
must be enforced more aggressively in the future, European Central Bank
President Jean-Claude Trichet said on Monday.

Pointing to a previous statement from heads of state and
government, Trichet said the Eurozone should only step in if needed to
stabilize the monetary union as a whole.

“We should not mix up a transfer or a subsidy with a
non-concessional loan such as those granted by the IMF,” Trichet said.
“I think we can only be talking about a loan without any subsidy
element. That needs to be extremely clear…That loan is the only
possibility in our view.”

“If strong conditionality would be imposed, if this would be a
purely non-concessional instrument, if it would correspond to an
immediate and grave threat for the country in question and if it would
have an impact on the euro area as a whole,” aid could be considered,
Trichet said.

But there must be a “serious and immediate problem” and it must be
a “problem for the whole Eurozone,” he said. “Those are the conditions
that the ECB sees for such support,” Trichet added, citing “stringent
conditions” and an “encompassing element of stabilization of the

The central bank’s president said, “I share your view that…the
[EU's Stability and Growth Pact] needs to be applied rigorously…I
would make a plea for implementing the pact…Let’s apply it. I would
not call necessarily for changing it.”

In particular, he called for more peer pressure to ensure fiscal

More generally, Trichet said that the Eurozone should focus on
strengthening current rules and institutions rather than creating new

Asked about the idea of a European Monetary Fund, floated by
Germany, Trichet said that it should be examined “on the basis of the
precise proposals.”

He reiterated his opposition to calling it a “monetary” fund, since
“we trust that there is a monetary institution in Europe, which is the

The ECB president also said he understands that the rules of such a
fund would imply “very strong conditionality,” and he emphasized that he
would be “very negative” about creating the statutory possibility of
expelling a country from the Eurozone.

Trichet dismissed concerns that the 16-nation zone could split up.

“The euro area is not a la carte. We enter into the euro area to
share a destiny in common,” he said. “I said I consider it absurd the
hypothesis of leaving the Euro area.”

–Frankfurt bureau. Tel: +49-69-720-142. Email: frankfurt@marketnews.com

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