Greece 'can't expect to be rescued'
Published 07/01/2010 | 05:00
GREECE cannot expect an EU bailout if it fails to curb government borrowing, even though it is a member of the euro area, the European Central Bank's chief economist said yesterday.
Juergen Stark was speaking to an Italian financial newspaper as officials from the ECB and the European Commission began a mission in Athens to examine a crisis programme to stabilise Greek public finances.
The Greek government is to submit the programme to the commission by the end of January. Its deficit is estimated to be 12.7pc of economic output (GDP), compared with Ireland's planned 11.6pc, but some analysts think the true Greek figure could be more like 15pc of GDP.
"The markets are deluding themselves when they think at a certain point the other member states will put their hands on their wallets to save Greece," Mr Stark said.
Some analysts said Mr Stark was probably using tough rhetoric in an effort to press the Greek government, and Greek public opinion, into accepting major public spending cuts.
"I'm very confident that were help to be needed, it would be there because there's so much at stake for the euro area," Jacques Cailloux, eurozone economist at RBS in London told Bloomberg News.
Alan McQuaid, chief economist at Bloxham Stockbrokers in Dublin, said France and Germany have said Greece can rely on its eurozone partners, although it must tidy up its budget: "An ECB legal paper said the EU could get a group of eight or more other states together to police a country's return to the straight and narrow, or persuade it to leave the union voluntarily. The bottom line is that Greece is by no means out of the woods yet."
Ciaran Callaghan, analyst with NCB Stockbrokers, said Ireland's performance on borrowing markets is beginning to stand out in comparison to other fringe European countries. Further improvement in Irish relative borrowing costs will have a positive funding impact, not only for the Government, but for Irish banks as they attempt to reduce their reliance on ECB emergency loans, he said.