Need to adjust Greece's 'lethal' fiscal mix, Steinbrueck says

Debt-hit Greece needs more time as well as adjustments to its “lethal” fiscal policy mix, argues German chancellor candidate Peer Steinbrueck, who says that his Social Democratic Party (SPD) has not yet decided how it will vote on the issue of granting emergency eurozone aid to Cyprus in parliament.

“Greece must carry out reforms and face the challenge of a change in its political culture,” Steinbrueck told Kathimerini on Sunday.

“But the fiscal consolidation mix cannot be allowed to be lethal. My idea is that in Greece’s case the dose was too high,” he said.

Greece, the SPD chief says, needs growth-inducing measures to attract foreign investment and reduce unemployment – or the country will suffer a prolonged recession and severe social turmoil. “Nobody in Europe wants to see this,” he said.

In the interview, Steinbrueck says he is against allowing the European Stability Mechanism to directly recapitalize banks. His rival Angela Merkel supports the idea as long as the EU banking union has been created.

“Banks must be recapitalized through their own means. This means troubled banks must first be capitalized by their creditors and shareholders, not the taxpayers,” he said.

Steinbrueck is less clear about his party’s stance toward Cyprus’s request for aid. Heavily exposed to Greece’s debt crisis, Nicosia has said it may run out of money in April unless it gets some 17 billion euros. EU officials say Cyprus must shrink its banking sector, privatize state firms and pass economic reforms as conditions for help. German MPs, who must approve the aid package, have raised concerns over alleged money laundering, which Nicosia strongly denies.

“Whoever comes to power after Cyprus’s presidential election will have to do more than just say, ‘I also think this is wrong.’ They will have to prove they plan to take measures,” Steinbrueck said.