Reuters | Tue Apr 27, 2010 | 3:16pm IST
The aid package for Greece must tackle the root causes of the country’s economic weaknesses, European Central Bank Vice-President Lucas Papademos said on Tuesday. Papademos, a former head of the Bank of Greece, said financial market pressures on Greece had intensified despite the country’s promises to clean up its public finances and support for the reforms from European Union policymakers. Greece asked for emergency aid on Friday and is currently in talks with the European Union, the International Monetary Fund and the ECB on the terms of the deal.
"It is essential that the economic programme currently being prepared by the European Commission, the ECB and the IMF together with the Greek authorities specifies comprehensive fiscal measures and structural reforms that will address the root causes of Greece’s fiscal imbalances and structural weaknesses so as to ensure the sustainability of its public finances and improve the country’s international competitiveness," Papademos told a European parliament committee. He urged all euro zone countries to stick to EU budget rules, warning that fiscal imbalances were not expected to see a discernible improvement until 2011-2012. He also warned that some fiscal repair plans did not have enough detail or were based on over-optimistic assumptions.
"In several stability programmes, the fiscal strategies presented are not underpinned by adequately specified measures, in particular for the latter years of the projection horizon. Moreover, in a number of cases, the stability programmes are based on optimistic macroeconomic assumptions that put the