No escaping the economic pain

European Central Bank Executive Board member Lorenzo Bini Smaghi said on Tuesday that there is ?no alternative? to Greece paying its debts and carrying through its reform program despite the economic pain.

?We expect the Greeks to repay their debts,? Bini Smaghi told Austrian ORF radio.

?The best way to do that is to implement the program that has been agreed with the [International Monetary Fund] and the European Union, which maybe needs to be strengthened.

?It?s not by not repaying the debts that the Greeks will solve the problems, it would actually make their own problems worse,? Bini Smaghi said.

The ECB Executive Board member said that Greece needs to begin implementation of its privatization program and structural reforms, which would ?provide it with some financing.? Action to reduce monopolies and increase tax collection is also needed, Bini Smaghi said.

On Monday, Greece approved 6 billion euros of additional budget savings for 2011 in a bid to keep deficit reduction plans on track and said it will push ahead with its stalled privatizations agenda. Stakes in OTE telecom and Hellenic Postbank are among those that will go under the hammer first.

Investors, however, did not seem too impressed by the announcements.

Greek 10-year yields were little changed on Monday at a record 17 percent, while yields on two-year notes slipped 18 basis points to 26.07 percent. Contracts on Greek default insurance jumped 27 basis points to a record 1,400.

Meanwhile, a pro-business panel in German Chancellor Angela Merkel?s ruling conservatives said on Monday that debt-laden eurozone countries, such as Greece, should only receive further financial aid if they cut social benefits.

The economic panel of Merkel?s conservative Christian Democrats (CDU) said it was not enough for Greece to cut its retirement age to German levels.

Greek pensions are still around 94 percent of average Greek income, while Germans get only 40 percent, said panel head Kurt Lauk, who is not a member of Germany?s parliament.

The Bundestag, or lower house of parliament, has no say in the paying out of individual tranches of aid in Greece?s bailout agreed last year, but it would be involved in signing off on any further bailout for Greece.

?There can only be aid to bust countries if they pay lower social benefits than the giving countries,? said Lauk.

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