–Adds quotes on Greece letter, ability to repay, impact on EMU states
MADRID (MNI) – Greece has begun talks with an eye towards
activating the joint Eurozone-IMF aid plan that was unveiled last
Sunday, European Central Bank Governing Council member Ewald Nowotny
said here early Thursday evening.
“As you know, Greece has already started talks in that direction,
and this is why all this planning has been done. So [the plan] is not
just for theory but for practice,” Nowotny told reporters outside a
reception for Eurozone finance ministers and central bankers on the eve
of a two-day meeting that will start tomorrow.
Later, Nowotny reiterated that a letter sent today by Greece
Finance Minister George Papaconstantinou requesting talks with officials
from the ECB, the IMF and the European Commission, was a first step in
the process of formally requesting aid.
“I think this is exactly what has been foreseen,” he said. “There
is a clear structure of the decision-making process, and so this is a
step in this structural decision-making process, and at the end of the
day it leads to the activation of the program.” He called the letter a
“positive development” for Greece.
Eurozone finance ministers last Sunday agreed on a three-year
contingency plan in which they would make up to E30 billion worth of
loans available to Greece in the first year, with additional funds
negotiable in subsequent years. The IMF would contribute another E10 to
E15 billion, sources said.
But since the Eurozone announcement last weekend, markets have been
frustrated by vagueness and lack of detail about the plan — in
particular, how the IMF portion of it would mesh with the Eurozone
loans.
A Greek official told Market News earlier today that Greece was
seeking “immediate” clarification of those details, though he said the
letter from Papaconstantinou did not in itself constitute a request for
aid.
Asked about the continued turbulence in markets, which have kept
Greek bond yields at exceptionally high levels despite the aid deal,
Nowotny responded: “Well, but things have to be activated. So therefore
I think what is necessary is really to activate the measures foreseen,
and then I’m sure they will have an impact on the markets.”
Nowotny, who heads the Austrian National Bank, also sought to
dispel fears that the problems in Greece could spread to other
fiscally-challenged EMU states such as Portugal and Spain. “This was
exactly the reason why the measures by the EU have been taken, in
coordination with the IMF, so that should be exactly the way to prevent
spreading to other countries,” he said.
He denied reports that the IMF was trying to dictate all the terms.
“No. As you know, this is a process where a very clear mechanism has
been developed and this is a mechanism of cooperation between the
commission and the IMF,” he said.
He later added that there is “a very well-planned and structured
approach and there always will be a very close cooperation between the
EU and the IMF, so I don’t see any major problems in that respect.” He
also refuted the notion that loans from the IMF might be considered
senior debt while the EU loans would not. “No, I don’t think so,” he
said in response to that question.
Nowotny downplayed the risk, widely reported, that a legal
challenge to the Greece aid deal in Germany’s Constitutional Court could
block Germany’s participation in the Greece plan, a development that
could cripple it.
“The heads of state have been very cautious in fulfilling all the
legal requirements, so I’m quite sure that in this way things will go
along as foreseen,” he said.
He added that if a country’s participation were delayed, it would
not hold the plan up. “In the decisions by the Council it has become
clear that even if one country at least for some time cannot take part,
this does not hinder the rest to go along,” he said.
If a large EMU nation failed to ratify its participation in the
plan, “that would be a problem but we do not think that it is a
realistic perspective,” Nowotny said.
Nowotny steadfastly denied that the involvement of the IMF in the
plan could put the ECB’s independence at risk. “No, not at all. Because
all this has been done with the cooperation of the ECB,” he argued.
“President [Jean-Claude] Trichet has been part of all the decisions to
be taken. And moreover, I want to stress, it is not an aid package, it
is a loan. So something has to be repaid.”
And he suggested that Greece would be able to meet its repayment
obligations. “The IMF has done a number of successful programs. We do
have successful cooperation between the IMF and the EU Commission, for
instance, in Hungary. So I do not see a reason why this should not work
in this case,” he said.
He reiterated that all EMU countries would participate in the
Greece plan, and he said that countries that are fiscally-challenged
themselves would still be able to shoulder their share of the loan
disbursements to Greece.
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