ECB economist warns Greece of limits to financial aid
The head economist at the European Central Bank, Juergen Stark, warned Athens Tuesday that aid for Greece did not come from "a bottomless well," in an interview with a regional German radio.
"I do not see it as a bottomless well," Stark told Bayerischer Rundfunk in reference to the 110 billion euros ($157 billion) in financial aid for Greece, mainly from the European Union and the International Monetary Fund.
"I think that what we have set in place a year ago with the International Monetary Fund is a realistic programme that must be applied," the economist added.
Greek officials that are now seeking more EU aid have been taken to task for not having made more progress in trimming the nation's debt and raising tax income.
The ECB has taken part in the programme through purchases of Greek public debt on secondary markets, and is believed to hold several tens of billions of euros worth of bonds issued by Athens.
"Greece has a lot of debts, but Greece is not insolvent," Stark said, before adding that a "restructuring (of Greece's debts) is not the solution."
He echoed comments made last week by ECB president Jean-Claude Trichet following a governing council meeting in Helsinki.
The central bank feels that discussion of debt restructuring would send the wrong signal to financial markets and drive up Greece's borrowing costs.
But the markets are already convinced that Greece will have to take some measures to lighten its debt burden, at least by extending the time over which it pays debts back.
In theory, Greece was supposed to be able to access private equity markets in 2012, but economists say this is no longer a very realistic scenario.
© 2011 AFP