* Essential that states return to growth to cut their debt
* Some have already taken harsh austerity measures
* Decision on Spain is political, consensus needed
* Rehn says ECB bond buying move vital to stabilise markets
By Daniel Flynn
PARIS, Sept 8 Countries that apply for an ECB
bond-buying programme will not necessarily be asked to make more
cuts because some have already taken strong steps in that
direction, ECB executive board member Benoit Coeure said on
Coeure, in remarks that might assuage concerns in Spain
about requesting ECB support to cut borrowing costs, said the
idea of the central bank's programme "is not to pile more
austerity on top of austerity".
The ECB agreed on Thursday to launch a potentially unlimited
bond-buying programme to lower struggling euro zone members'
borrowing costs, despite resistance from Germany's Bundesbank,
sending financial markets in Europe soaring.
European Commissioner for Economic and Monetary Affairs Olli
Rehn told Reuters on Saturday the ECB plan was a major step
towards stabilising markets.
"The ECB has done a major service for short term market
stabilisation," Rehn said, calling the ECB's decision "an
essential element of crisis response of the euro area."
ECB President Mario Draghi said the scheme was subject to
strict conditions, including applicant countries first
requesting aid from Europe's bailout funds, which might involve
commitments to carry out further reforms.
This raised doubts as to whether Spain - battling a deep
recession and unemployment running at around 25 percent - would
apply. Prime Minister Mariano Rajoy has insisted he has already
taken the necessary painful steps to restore public finances.
Spain said it would discuss conditions attached to the ECB
programme next week with its euro zone partners, insisting it
was in no hurry to seek international aid.
The premium investors demand to hold Spanish debt rather
than German benchmark has already dropped to around 423 basis
points from a high of around 646 basis points in July.
Italy, the second euro zone country viewed as a likely
beneficiary of the ECB bond plan, has no plan to tap the
"We have no intention to apply for these kind of
programmes," Italian Economy Minister Vittorio Grilli told
reporters on the sidelines of a business event in Cernobbio.
Speaking on France Inter radio, the ECB's Coeure agreed the
decision on aid terms was a political one for an applicant
country and its euro zone partners.
But he also noted that ECB intervention could only work "if
countries are on the road back to growth that will allow them to
reduce their debt.
"That does not necessarily mean more austerity. Certain
countries, as we know, have already taken a lot of steps in the
right direction and so there would not necessarily be any
further demands made upon them."
Rehn, asked about how 'conditionality' for the ECB
bond-buying plan would work, said "it will be based on existing
and current country-specific recommendations."
The conditions "would have to include very specific
objectives and a timetable for meeting these objectives."
Coeure said the ECB's bond buying would not be enough to
resolve the euro zone crisis and growth would remain weak in
2012 and 2013.
Lower debt levels were a condition for a return to growth,
he said, but policies were also required to kick-start euro zone
economies, such as the 120 billion euro stimulus package agreed
by the bloc's leaders earlier this year.
"Today, we are in a situation where the single market is no
longer working, particularly in the case of the capital market,"
Coeure said, also pointing to fragmentation in the services and
Coeure said that a Europe-wide unemployment benefits scheme
would allow workers to move more freely around the region.