ECONOMY

ECB officials warn more steps are required

Greece must do more than just pass the bill for the new austerity package, European officials warned on Thursday in the aftermath of the votes for the midterm fiscal plan and the implementation law in Parliament.

Ewald Nowotny, a member of the European Central Bank?s Governing Council, said austerity is not as painful as a default and stressed that the measures passed were ?a positive step, but it?s clear that more steps need to follow.? He went on to warn that privatization of state assets ?must be quickly implemented.?

?A default is exactly what we want to avoid in the interest of the entire European economy and the European internal market,? Nowotny told Austrian state radio.

ECB President Jean-Claude Trichet noted on Thursday that ?these corrections are necessary if we want to get back to growth and job creation.? He added that the heavily indebted eurozone countries, which he did not name, faced tough austerity measures but were responsible for their crises.

?What we call austerity today is correction of, in many cases I have to say, evolution in the past that was not reasonable and should have been prevented,? the ECB head said.

He mentioned public sector wages and salaries in three countries, clearly referring to Greece as well, that were ?very significantly higher than the average augmentation of unit labor costs in the euro area as a whole.?

Asked about the possibility of the Greek debt crisis affecting the bank?s intention to perform a 25-basis point interest rate increase in its July 7 meeting, to bring it to 1.50 percent, Trichet rejected any such prospect.

He insisted that the ECB was ?in strong vigilance? mode given that the June inflation data for the eurozone are well above the bank?s target of just under 2 percent. This is the phrase that typically paves the way for a rate hike at the next meeting.