ECB?s Asmussen: More time for Greece means more money needed
European Central Bank Executive Board member Joerg Asmussen said extending the amount of time Greece has to meet the terms of its bailout means European donor states would have to provide more funding.
?The country still runs a primary deficit,? Asmussen told Bloomberg Television in Tokyo on Friday. ?If you give a country more time to reach the fiscal target, it automatically means that you need additional external financing and that has to be provided by the member states of the European Union.?
Inspectors from the so-called troika of the ECB, the International Monetary Fund and the European Union are engaged in talks with the Greek government over budget cuts and economic reforms needed to unlock a payment of 31 billion euros promised under an international rescue.
Asmussen said there are still ?elements missing to conclude the budget for 2013.? At the same time, Spain hasn?t indicated it will request aid, he said.
Discussing the conditions required for the ECB to activate its unlimited bond-buying program, known as OMT, Asmussen indicated that the involvement of the IMF is a pre-condition for the ECB’s measures to be used.
“We at the ECB have outlined two necessary conditions for the OMT to be activated, one is an ESM program and another is the involvement of the IMF,” he said.
Portugal and Ireland don?t currently qualify for purchases under their existing IMF-EU bailout programs, Asmussen said.
?A condition that is laid down in the decision is that they have regained full bond market access,? he said. ?It is not enough to have issued T-bills but they must have regained full market access.?
While the ECB has said it won?t demand seniority status on bonds it buys in the new program, Asmussen said that doesn?t mean it expects to take losses.
?That implies that a country would default on its sovereign bonds, that is absolutely not what I?m expecting to happen,? Asmussen said.
The OMT program has helped remove the impression on financial markets that the euro would break up, Asmussen said.
?Our decision has been supportive to this,? he said. ?It was a decisive step to really create a credible backstop to any tail risk that might be there.?
[Bloomberg]
