Feb. 14 (Bloomberg) -- Greece shouldn’t be in the 17-nation euro region if it doesn’t comply with the conditions attached to a second bailout package, Luxembourg’s Finance Minister Luc Frieden said.
While Europeans officials’ preferred option is to keep Greece in the monetary union, Greece holds the key to its euro membership, Frieden said, speaking at the Atlantic Council in Washington yesterday. Greece’s implementation of the austerity measures negotiated with the European Union and the International Monetary Fund will need to be monitored, he said.
“If they don’t do all this, then we must go on with 16 countries,” Frieden said. “If they don’t do this, they exclude themselves from the euro zone and the impact on the other countries now would be less important than maybe a year ago.”
Euro-area finance chiefs will convene in Brussels on Feb. 15 for their second extraordinary meeting on Greece in a week. Frustrated after two years of missed budget targets, ministers declined to ratify the 130 billion-euro ($171 billion) package in a special session on Feb. 9, demanding that Greek officials put their verbal commitments into law.
The steps include a 22 percent reduction in the minimum wage, smaller pensions and immediate job cuts for as many as 15,000 state workers.
Frieden declined to say whether Greece will need more public money than the 130 billion euros of the package because Europeans have yet to get all the estimates of how the new Greek measures and policies will reduce the country’s debt burden.
In Greece’s Hands
“I don’t think the other countries can add much to this,” he said. “This is in the hands of Greece, knowing that this is very difficult,” in order to meet previously agreed debt level targets.
Frieden, who yesterday also met with U.S. Treasury Department officials, called on the IMF’s largest shareholder to help strengthen the institution and make it part of a firewall to quell the European debt crisis.
“I do think what we are seeing in Europe is not only a Europe crisis,” Frieden said. The European fiscal crisis “is to some extent the consequence” of the U.S-originated financial crisis of 2008, he said.
The IMF is seeking to raise its lending capacity by $500 billion. While euro-region nations have already pledged to contribute 150 billion euros ($197 billion), the U.S. has said it has no plans to make new bilateral loans and leaders of Group of 20 nations ended last year at odds over the issue.
Asked whether the U.S should contribute to boost IMF resources, Frieden said “probably at some point in time.”
“Most important is that the IMF is with the European institutions in this,” he said.
--Editors: Kevin Costelloe, Brendan Murray
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