ECB’s Nowotny: EU safety net should reassure on Greece

VIENNA (BestGrowthStock) – The European Union’s safety net for Greece’s should help reassure investors although there is currently no sign Greece will use it, European Central Bank Governing Council member Ewald Nowotny said on Friday. Greek Finance Minister George Papaconstantinou said earlier on Friday Greece was not seeking the activation of the aid package.

“Simply the fact that there is a safety net from the EU is something that should already calm the situation,” Nowotny told Austrian radio station ORF.

Referring to whether Greece would need to use the EU safety net, he said: “There is no indication of this at the moment.”

Yields on Greek bonds and the cost of insuring against a credit default eased on Friday after blowing out on Thursday, but remain elevated.

Nowotny said in the longer term, it was unsustainable for Greece to have to pay such high rates on its debt.

“We have seen that Greece must pay very high rates (for its debt). In the long run this is a situation which certainly cannot be maintained,” he said.

Traders say the market for Greek government bills is effectively frozen but indicative yields are around 7 percent on six-month and one-year paper.

Uncertainty would likely persist while questions over the size of Greece’s budget gap remained, Nowotny said.

“We see that Greece has a very difficult task before it because as before there is no complete clarity over deficit figures in Greece,” he said.

“When all uncertainties (about Greece’s fiscal situation) are cleared up then the markets should calm down again.”

(Reporting by Sylvia Westall, writing by Krista Hughes)

ECB’s Nowotny: EU safety net should reassure on Greece