European Central Bank head Jean-Claude Trichet on Thursday dismissed the notion that Greece could leave the eurozone because of its debt crisis but told Athens it had to get its finances in order. Trichet said suggestions that Greece might resign or be expelled from the 16-nation eurozone because of its soaring deficit and debt reflected an "absurd hypothesis." He added however that Greece and several other eurozone members had "a lot of hard work to do." Trichet spoke after the central bank kept its key interest rate at a record low 1.0 percent to underpin what it said would be a moderate economic recovery.
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In a message to all eurozone countries hit by a global slump, the ECB chief said: "They have to address the situation in taking the appropriate, bold and courageous measures" to get strained public finances under control.
Greece's debt debacle thrust it to the top of the bank's list of problems, but Ireland, Italy, Portugal and Spain have troubles of their own and analysts say market fears could fuel a full-blown crisis if officials do not act credibly and soon.
Trichet said there would be no exception for Greek government bonds within the bank's collateral requirements, which are to revert to pre-crisis criteria at the end of this year.
That would mean that Greek bonds would not be accepted as collateral by the bank at current ratings.
"No government, no state can expect from us any special treatment," he stressed.
Although direct assistance by the bank or eurozone members to Greece would violate rules on which the single currency is based, observers widely expect some kind of EU help for Greece in the end.
For the ECB chief however, "the problem is not to get help, the problem is to help oneself."
He commended an austerity budget unveiled by Dublin, saying: "What I have seen coming from Ireland has been quite impressive in terms of adjusting to new circumstances without losing time."
Greek officials pledged to present Friday a plan for resolving the debt crisis, with Finance Minister George Papaconstantinou calling it a "roadmap" to reverse the "huge credibility gap" Greece faces in financial markets.
Barclays Capital economist Thorsten Polleit told AFP: "Unsound public finances are not a natural catastrophe, they are the result of political decisions. That gives hope that governments are going to take action."
He warned however that "if people become convinced that this is not the case, this could be serious."
The rest of Trichet's press conference suggested the ECB will leave its main lending at on hold for most if not all of the year while gradually withdrawing exceptional monetary supply measures as market conditions permit.
The bank said the economy should grow "at a moderate pace in 2010" but that the recovery would likely be uneven and was "subject to uncertainty."
With current rates deemed appropriate, little news was expected in the coming months therefore.
"After all the excitement of the last year, a healthy dose of boredom has returned to the ECB meetings," ING senior economist Carsten Brzeski concluded.
15.01.2010
