EU officials talk of carrots, sticks for Greece

16th May 2011, Comments 0 comments

European Union economic affairs chief Olli Rehn pressed Greece on Monday to speed up reforms as a German colleague floated the idea of an EU plan for less competitive countries.

"I will say it very clearly, Greece must accelerate its economic reforms and set up a complete privatisation programme," Rehn, who is Finnish, told the German daily Die Welt.

Athens already benefits from a financial rescue package worth 110 billion euros ($155 billion) but markets believe it will need as much as 60 billion more to meet debt payments over the next two years.

Even if opposition in countries like Finland and Germany to more aid is overcome, "it is an illusion to think there is an alternative to reforms," Rehn said as he urged Greek political leaders to settle squabbles and get to work.

The head of the Austrian central bank, Ewald Nowotny, told the German financial daily Handelsblatt meanwhile that Greece had to begin selling some of its hundreds of billions of euros in assets to help pay its debts.

"This programme must be undertaken, it would send an important signal" to markets, Nowotny said in comments that echoed remarks by the International Monetary Funds director for Europe last week.

Greek Prime Minister Georges Papandreou has said privatisations are now one of his government's top priorities.

But he lashed back at proposals by some German politicians that Greece give up one of its islands or a historical monument as a warranty for fresh loans.

"To ask us for an island or a monument as a warranty is almost an insult," Papandreou told the Italian daily Corriere della Sera in an interview published on Saturday.

Nowotny, who sits on the European Central Bank's governing council, said that "Athens could well receive fresh credits" but insisted that "they would have to contain very strict conditions."

Despite a huge effort last year, Greece failed to meet deficit reduction goals as the economy shrank faster than expected.

European energy commissioner Guenther Oettinger told the Hambuger Abendblatt newspaper in remarks published on Monday that he would back a "European economic programme for member states that are not competitive at the moment."

The German EU official said: "We must build value, in the small business sector, in services and in industry."

Last week, some German politicians floated the idea of a "Marshall Plan" to help Greece get back on its feet.

The Greek finance ministry said on Friday that the country's recession was "evening out" after official estimates showed growth of 0.8 percent in the first quarter of 2011.

© 2011 AFP

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