Page last updated at 17:22 GMT, Tuesday, 2 February 2010

Greece 'should not get bail-out'

Greek firefirghters protest over planned spending cuts
Greek firefighters protesting over spending cuts - the Greek government faces unpopular choices

One of the principal architects of the euro has strongly warned against bailing Greece out of its financial difficulties.

Greece's ballooning debts have hit the euro and European financial markets.

Yet Otmar Issing, a founding member of the European Central Bank, says bailing out Greece would endanger much-needed economic changes.

"Any sign that help might come, would undermine the efforts which are needed to reform the Greek economy," he said.

Ballooning debts

Reports have suggested that the EU might bail Greece out, which would calm the financial markets.

However, Otmar Issing, who was one of the founding members of the Executive Board of the European Central Bank, told BBC World Service that this would undermine the Greek government's planned drastic budget cuts.

"These reforms which are needed will be blood and tears, to use this phrase, but without that, Greece will never overcome the difficulties.

"It is after years of violating rules, cheating on figures, financing consumption, public and private by huge debts - this is a way which has to be stopped.

"Greece has to turn in the other direction, there is no alternative to that," said Dr Issing.

Economic suicide

Despite the impact on European bond markets, and the value of the euro itself, Dr Issing said the Europe's financial authorities should "be very careful" not "to be blackmailed".

Protesting farmers march in central Athens on January 25, 2010. Greek farmers, who have blocked highways and frontier posts for a week to demand higher product prices
Farmers in Athens demanding higher prices for their products

"I am convinced Greece will not default, if it recognises the situation and takes the right decisions, but I would be rather cool against any threat of default.

"The option of leaving monetary union, in reality, is not an option for Greece, because it would come close to committing economic suicide," he said.

EU rules state that no nation in the euro bloc should have an annual budget deficit which is higher than 3% of its gross domestic product.

Greece's public debt stands at about 300bn euros ($419bn, £259bn).

The government aims to shrink public debt to 9.1% of overall economic output this year, down from 12.7% last year.

However, many observers are sceptical that the government will be able to pass its budget, which calls for huge cuts in public spending.



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