PARIS (Reuters) - Countries that apply for an ECB bond-buying program 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 Saturday.
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 program “is not to pile more austerity on top of austerity”.
The ECB agreed on Thursday to launch a potentially unlimited bond-buying program 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 stabilizing markets.
“The ECB has done a major service for short term market stabilization,” 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 program 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 mechanism.
“We have no intention to apply for these kind of programs,” 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 labor markets.
Coeure said that a Europe-wide unemployment benefits scheme would allow workers to move more freely around the region.
Additional reporting by Reporting by Francesca Landini and Lisa Jucca in Cernobbio, Italy. Additional writing by John Irish; Editing by Alison Williams, John Stonestreet