ECB chief urges firm action on Greek bailout, financial regulation

The eurozone states must have "a strong sense of direction" to pull Greece out of debt crisis as soon as possible, trying to end potential contagious risks, and take "a giant step forward" in intense surveillance of governments' finances, Jean-Claude Trichet, the President of the European Central Bank (ECB), said on Thursday.

Addressing the Munich Economic Summit hosted by the Ifo Institute for Economic Research, Trichet called for support of curbing Greek debt troubles from eurozone nations, to "avoid the materialization of financial risks for the euro area as a whole."

"What we need most at this time is a strong sense of direction that can guide us on how we can emerge from these turbulent events and how we can return to the path of economic stability," the president said.

"In the case of Greece, this will require courageous, recognizable and specific actions by the Greek government that will lastingly and credibly consolidate the public budget," Trichet stressed in a speech.

Delegates from the European Commission, the International Monetary Fund (IMF), and the ECB are negotiating with the Greek government, to make a concrete austerity plan for Greece, which was a major condition set by Germany for its bailout actions.

"I will not comment on the negotiations that are currently taking place in Athens," Trichet said."They have to be concluded by a courageous, comprehensive and convincing multi-year program and I am confident in regard to the results of these discussions", which could be completed in coming days.

He believed that the Greek fiscal crisis, as well as budget imbalance problems emerging in Spain and Portugal, revealed " weaknesses in the peer surveillance process and in the implementation of the Stability and Growth Pact."

International rating agency Standard &Poor's cut Spain's credit rating from AA plus to AA on Wednesday, a day after it downgraded Greek bond to "junk status" and Portugal's credit, triggering wide worries that the debt crisis would spread and harm the whole European economy.

One major lesson of the crisis is "the need to strengthen the institutional framework of the economic union," Trichet said, urging Germany, the largest economy in Europe, to devote considerable energy to "leap forward in policy surveillance and policy adjustment."

German President Horst Koehler, said at the summit that "it is understandable" for Greece to expect help so they can help themselves.""Germany should, in its own interest, do its part to contribute to stability," he said.

The euro zone has prepared a 30-billion-euro (40 billion U.S. dollars) aid package for Greece for one year, with an additional loan from the IMF worth of around 15 billion euros. According to the proposal, Germany would pay 8.4 billion euros a year, the biggest single contributor among 16 eurozone States.

Recent polls showed that the majority of Germans did not want their country to be involved in helping Greece. Faced with strong public opposition, the German government insisted that its aid commitment was "conditional" on Greece's taking proper steps to first cut its own budget.

Greece, whose public deficit equal to 13.6 percent of gross domestic product (GDP), requested an aid package from eurozone members and the IMF last week. On May 19, it must refinance an 8.5- billion-euro bond, and Athens said it was unable to pay back the money.

Source: Xinhua