Countries applying a program of buying bonds of the European Central Bank will not necessarily be at the request of making more cuts, as some governments have already taken solid steps in that direction, said Saturday Coeuré Benoit, a member of the governing council ECB.
In remarks that could allay some fears in Spain on ECB support request to reduce the performance of its sovereign bonds, Coeuré said the idea of the central bank’s program “is not stacking up more austerity”.
“The ECB’s intervention can only work if countries are on the way back to growth that will enable them to reduce their debt,” said Coeuré to France Inter in a radio.
“That does not necessarily mean more austerity. Certain countries, as we have already taken many steps in the right direction and therefore would not be necessarily more demands,” he added.
The ECB agreed Thursday to possibly launch an unlimited bond purchases to lower financing costs for members of the area euro in trouble, despite the resistance of the German Bundesbank , an announcement that triggered actions in European financial markets.
The ECB President Mario Draghi said the plan to buy short-term sovereign debt in the secondary market was subject to “strict and effective conditions” as that countries aspiring first request an aid program of rescue funds zone euro EFSF and ESM, which could involve further reform commitments.
This aggravated the debts over whether the government of President Mariano Rajoy, who is fighting a deep recession and unemployment of around 25 percent, would seek help. Rajoy has insisted that Spain has already taken the necessary and painful steps that were needed to restore public finances.
“This is a conversation that must take place not between Spain and the ECB, but between Spain and other eurozone members (…) It is a political decision,” said Coeuré.
The Spanish Deputy Prime Minister, Soraya Saenz de Santamaria, said that Spain will address the conditions that lead the ECB program with its partners in the area euro at a meeting of finance ministers of the EU to be held in Cyprus next week .
Coeuré said the ECB’s bond purchases will not solve the crisis of the block and that growth will remain weak in 2012 and 2013.
Reducing debt levels is a condition to return to growth, he said, but we also need policies to implement economies of the euro area, as the stimulus program of 120,000 million euros this year agreed by leaders of the region.
“Today we are in a situation in which the single market is no longer working, especially in the capital market,” said Coeuré, pointing also to fragmentation in the services and labor markets.
He also indicated that a pan-European plan Dole allow workers to move more freely through the region.
“There is a wide range of policies to restore economic dynamism in Europe that have not been explored enough,” he said. “It is urgent because this social crisis has lasted many months and the more you drag Europe into it, the worse the social and economic consequences,” he added.