BRUSSELS (Reuters) - The measures taken by Greece to cut its budget deficit this year are “convincing and encouraging,” but it has not been helped by market speculators and poor communication, European Central Bank Governing Council member Yves Mersch said in a Belgian newspaper.
“I was surprised by increasing speculation on the capacity of Greece to honour its debt. It has assumed proportions that have nothing to do with the healthy functioning of the markets. Speculation has played a major role,” Mersch said in an interview published in L’Echo on Tuesday.
Debt-stricken Greece has appealed to its European partners and the IMF for emergency loans, yielding to overwhelming market pressure to start the first financial rescue of a member of the euro zone.
The European Commission announced last Thursday that Greece’s 2009 public deficit was even higher than feared at 13.6 percent, raising the bar for this year’s drastic cut.
Mersch, speaking before this new deficit figure was revealed, described austerity measures announced by Greece’s socialist government for this year “convincing and encouraging.”
“The public deficit is expected to fall by 30 percent in 2010 compared to last year. It’s enormous! I would like to know other countries capable of such an effort,” Mersch told L’Echo.
However, its efforts have been undermined by poor communication from Greece itself and Europe.
“Unfortunately, the scope of this effort has suffered from a communication that I would not describe as optimal, neither from Greece nor from Europe. Markets have been disrupted by indiscriminate declarations at all levels. This is a lesson in what not to do.”
In the same interview, Mersch said policymakers should remain “prudent” on economic prospects.
Mersch said he would not be surprised if the harsh winter influenced figures in countries such as Germany in the first quarter. That could lead to a strong rebound in the second quarter.
He commented that a number of international institutions had forecast a slowdown in the second half, related to the situation in China, with a tightening of credit.
“I want to see a pick-up of investment. That does not mean that I am in favour of indefinitely maintaining the economic support measures and the anti-crisis programmes which are starting to weigh heavily on public finances and which are themselves becoming obstacle to medium-term growth.”
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